Gold Monetisation Scheme: Eligibility, Process & Benefits

The World Gold Council says that Indian households own the most gold in the country. Much of this gold is kept in traditional jewellery and by religious groups. To convert this asset into a more productive economic resource, the Government of India has launched the Gold Monetisation Scheme (GMS). This government initiative encourages individuals and institutions to deposit their gold with designated banks and earn interest on it.

In simple terms, it’s a modern gold investment scheme that allows gold holders to get the benefits of their physical gold holdings. Let's understand this scheme in detail!

What is the Gold Monetisation Scheme?

The Gold Monetization Scheme converts unused gold into a productive financial asset. Instead of keeping gold jewellery or gold coins in bank lockers, depositors can make gold deposits through authorised banks. Gold is refined, verified for purity, and converted into tradable or interbank lending assets, such as tradable gold bars.

This monetisation scheme benefits both the depositor and the nation. The depositor earns interest in Indian rupees while the government mobilises idle gold holdings for productive purposes, such as reducing imports and stabilising gold prices.

How Does the Gold Monetisation Scheme Work?

To understand how the gold monetization scheme works, see the flow below:

1. Collection and Purity Testing: Visit an authorised purity testing centre, located in designated banks. The centre checks the gold quantity and purity of the gold deposited, including jewellery (excluding stones), gold bars, and raw gold.

2. Deposit Receipt Issuance: Once verified, you receive a deposit receipt that shows the quantity of gold in grams.

3. Open a Gold Deposit Account: The bank opens a Gold Savings Account, where the deposit certificates show the gold value in Indian rupees (INR equivalent).

4. Interest Accrual: You begin earning interest on the gold deposited, according to the applicable interest rates set by the central government.

5. Redemption: At maturity, you can opt for either cash or gold redemption, depending on the type of deposit selected.

This is how simple and secure the scheme is under the gold deposit scheme.

Types of Gold Deposits Under the Gold Monetisation Scheme

The gold deposit plan gives you a choice of three different types of deposits:

• Short-term Gold Deposit (STGD): The tenure for short-term bank deposits ranges from 1 to 3 years, with specific terms decided by individual banks. The interest is paid in Indian rupees, and these deposits are maintained with banks.

• Medium-term Government Deposit (MTGD): The Central Government and the Reserve Bank of India (RBI) jointly determine the interest rate. The term is 5 to 7 years.

• Long-term Government Deposit (LGTGD): The period is 12 to 15 years, and the interest rates are higher than those on short- and medium-term deposits. These are for investors who want to hold onto their money for a long time, such as financial institutions or large businesses.

The government has decided to discontinue the Medium Term Gold Deposit (MTGD) and Long Term Gold Deposit (LTGD) under the Gold Monetisation Scheme (GMS). This was from March 26, 2025, due to changing market conditions. However, banks will still provide the Short Term Gold Deposit (STGD) program under the GMS.

Gold Metal Loan Scheme

The Gold Metal Loan Scheme works in conjunction with the Gold Monetisation Scheme (GMS). It allows jewellers and manufacturers to obtain bank loans using gold mobilised through the scheme. It will enable businesses to utilise the gold they have deposited to obtain funds for activities such as jewellery making.

The plan helps the Indian economy and the gold sector by connecting gold investments to industrial activity. It also provides the required liquidity to the gold sector.

Read Also: 7 Benefits of Taking a Gold Loan

Eligibility Criteria for the Gold Monetisation Scheme

The Gold Monetisation Scheme has extensive eligibility rules, so practically all main types of investors can take part:

• Individuals (single or joint)

• Hindu Undivided Families (HUFs)

• Proprietorship and Partnership Firms

• Companies

• Trusts (including Mutual Funds and Exchange-Traded Funds registered under SEBI)

• Charitable Institutions

• Central Government, State Governments, or any other entity owned by them

All applicants must follow Know Your Customer (KYC) rules by providing proof of identity and address when making a gold deposit.

Step-by-Step Process to Enrol in the Gold Monetisation Scheme

Follow these easy steps:

1. Visit an authorised bank or Purity Testing Centre (PTC) that’s part of the Gold Monetisation Scheme.

2. Submit your gold, it can be jewellery (excluding stones), gold bars, or coins.

3. Get your gold tested for purity and quantity. Once verified, banks will accept gold deposits. Then, you’ll receive a deposit receipt showing the details of your gold deposited.

4. Open a Gold Deposit Account with the authorised bank using the deposit receipt.

5. Start earning interest on your deposited gold, as per the applicable interest rates set by the Central Government or the bank.

It’s a secure and straightforward process, making it easy for individuals, trusts, and charitable institutions to participate and earn returns on their idle gold.

Benefits of the Gold Monetisation Scheme

The Gold Monetisation Scheme (GMS) offers several advantages to both individuals and the nation:

• Earn Interest: Convert your gold into a source of regular income.

• No Storage Challenges: No need to keep gold in lockers or almirahs; the bank safely holds it for you.

• Flexibility: You can choose to redeem your deposit in cash or gold at maturity.

• Supports National Growth: Helps reduce the country's reliance on imports and strengthens the economy by mobilising idle gold holdings.

Tax Benefits under the Gold Monetisation Scheme

The tax advantages of the Gold Monetisation Scheme (GMS) are among its most significant benefits. As per the Income Tax Department of India:

• Interest payments and capital gains on gold deposited are exempt from tax.

• There is no wealth tax on gold mobilised under the scheme.

These tax benefits make the GMS an attractive option for gold investments, especially for long-term investors.

The scheme details clearly highlight a national objective, to channel idle gold into the financial system. By mobilising grams of raw gold deposited under the Gold Monetisation Scheme, the Central Government aims to reduce the country’s reliance on gold imports. It also helps strengthen foreign currency reserves.

The Government of India and State Governments continue to refine the revamped Gold Deposit Scheme for greater transparency and broader public participation. The latest updates came into effect on March 26, 2025.

To Conclude

The Gold Monetisation Scheme is more than just a way to save money; it's a bridge between traditional and modern methods of managing wealth. It enables every gold holder to convert their unused gold into a growing asset and contribute to India's economy.

If you’re inspired to make your idle gold work for you, consider turning it into a source of instant liquidity. Explore a secure and flexible Gold Loan with Poonawalla Fincorp and convert your gold into an opportunity today.

FAQs

What is the main objective of the Gold Monetisation Scheme?

The main objective of the Gold Monetization Scheme is to mobilise idle gold and put it to productive use through the banking system.

Can trusts and charitable institutions receive benefits of the Gold Monetisation Scheme?

Yes, trusts and charitable institutions can deposit gold under the scheme and earn interest on their idle holdings.

How is the interest rate in GMS decided?

The central government decides the interest rates based on the deposit type and tenure.

Can I withdraw my gold before maturity?

Yes, premature redemption is allowed after the minimum lock-in period, subject to certain conditions.

Does the scheme affect my tax liability?

No. The interest earned and capital gains are exempt under the Income Tax Act, offering tax benefits.