Gold is often held as jewellery, coins or bars, but unused physical gold can sometimes remain an idle asset. The Gold Monetisation Scheme (GMS) allows eligible gold holders to potentially earn returns from qualifying gold deposited through participating banks.
However, the scheme has evolved since its launch in 2015, and some of its original deposit options are no longer available for new deposits. Understanding the current Gold Monetisation Scheme eligibility, process, benefits, and deposit options can help you assess whether it is suitable for your gold holdings. Keep reading to learn more.
What Is the Gold Monetisation Scheme?
The Gold Monetisation Scheme was introduced by the Government of India in 2015 to mobilise gold held by households and institutions and facilitate its productive use. One of its long-term objectives is to reduce India’s reliance on imported gold.
Under the scheme, eligible depositors can deposit qualifying physical gold through designated banks and the applicable testing and collection facilities. The gold is tested for purity before the deposit is accepted and credited to a Gold Deposit Account.
As of November 2024, around 31,164 kilograms of gold had been mobilised under the GMS since its launch. This included 7,509 kilograms under short-term deposits, 9,728 kilograms under medium-term deposits, and 13,926 kilograms under long-term deposits.
Is the Gold Monetisation Scheme Still Available in India?
GMS exists, but its structure has changed. It originally provided for three types of deposits. The Medium-Term Government Deposit (MTGD) and Long-Term Government Deposit (LTGD) components were discontinued. Check this table for more information:
| Deposit type | Original tenure | Current status |
|---|---|---|
| Short-Term Bank Deposit (STBD) | 1-3 years | Continues, subject to participating bank availability |
| Medium-Term Government Deposit (MTGD) | 5-7 years | New mobilisation and renewal discontinued from March 26, 2025 |
| Long-Term Government Deposit (LTGD) | 12-15 years | New mobilisation and renewal discontinued from March 26, 2025 |
The RBI confirmed that there was no corresponding change to the provisions relating to Short-Term Bank Deposits (STBD). Existing MTGD and LTGD deposits continue under the applicable rules until maturity, subject to permitted premature withdrawal.
How Does the Gold Monetisation Scheme Work?
The process involves gold testing, acceptance, and the creation of the applicable deposit with a designated bank.
Step 1: Deposit Gold at an Authorised Centre
An eligible depositor first needs to complete the applicable KYC requirements and approach a designated bank participating in the scheme.
Gold is generally submitted through a Collection and Purity Testing Centre (CPTC) or a GMS Mobilisation, Collection & Testing Agent (GMCTA), as applicable. The RBI states that the testing facility checks the purity of the gold in the depositor’s presence.
Step 2: Gold Purity Testing and Acceptance
The gold is tested to determine its purity and eligible quantity. Accepted deposits are issued as standard gold of 995 fineness. The minimum deposit is 10 grams of raw gold, including eligible jewellery, coins and bars, excluding stones and other metals.
If jewellery is deposited, it is usually melted during the fire assay process. Once fire assay is authorised, the original jewellery will not be recoverable in its original form.
Step 3: Opening a Gold Deposit Account
After the gold is accepted and the required procedures are completed, the designated bank credits the applicable Gold Deposit Account.
For STBD, the bank credits the customer’s account on receiving the deposit receipt or within 30 days of gold being deposited, whichever is earlier. Interest begins accruing from the date the gold is converted into tradable gold bars or 30 days after receipt at the CPTC/GMCTA, whichever is earlier.
Step 4: Interest and Redemption
STBD has a tenure of one to three years. The applicable interest rate, payment frequency and certain premature-closure provisions are determined by the participating bank.
At maturity, the STBD principal can be redeemed in gold or its INR equivalent, based on the gold’s value at redemption. The option is selected when making the deposit. Interest is paid in INR with reference to the value of the gold at the time of deposit.
Who Can Open a Gold Monetisation Scheme Deposit?
The RBI states that the following resident Indian individuals and entities are eligible to make deposits under GMS, subject to the applicable requirements.
| Eligible depositor | Eligibility |
|---|---|
| Individuals | Resident Indian individuals |
| HUFs | Hindu Undivided Families |
| Proprietorship and partnership firms | Eligible resident firms |
| Trusts | Eligible trusts, including specified mutual funds and ETFs registered under SEBI regulations |
| Companies | Eligible companies |
| Charitable institutions | Eligible charitable institutions |
| Government entities | Central/State Governments and eligible entities owned by them |
KYC requirements must also be met before depositing gold unless the depositor is already KYC-compliant with the bank. Joint deposits by two or more eligible depositors are also permitted under the scheme.
Documents Required for the Gold Monetisation Scheme
Depending on the depositor and bank, commonly required information may include:
- Identity and address proof
- PAN and other applicable KYC details
- Bank account details
- Entity-related documents, where applicable
- Any additional documentation requested by the participating bank or authorised testing facility
It is advisable to confirm the document requirements with the participating bank before taking gold for testing.
Benefits of the Gold Monetisation Scheme
The GMS offers benefits to eligible gold holders while supporting the broader objective of putting idle gold holdings to productive use.
- Earn Returns on Deposited Gold: Instead of keeping eligible gold unused, depositors can earn interest on their gold under the applicable deposit terms.
- Reduce Physical Storage Needs: Depositing gold can reduce the need to store unused jewellery, coins or bars at home or in a locker.
- Redemption Options: At maturity, eligible deposits can be redeemed in gold or the INR equivalent of the gold’s value, subject to the applicable scheme and bank terms.
- Contribute to Gold Mobilisation: By bringing idle gold into the formal financial system, GMS supports the government’s objective of reducing reliance on imported gold and putting domestic gold holdings to productive use.
Gold Monetisation Scheme vs Gold Loan vs Selling Gold
While the underlying asset remains the same, depositing gold, borrowing against it, and selling it serve different financial purposes. Each option has different implications depending on whether the objective is earning returns, accessing funds, or liquidating an asset.
| Factor | Gold Monetisation Scheme | Gold Loan | Selling Gold |
|---|---|---|---|
| Primary purpose | Monetise eligible idle gold | Raise funds against pledged gold | Convert gold into immediate cash |
| Customer receives | Potential interest/return | Loan proceeds | Sale proceeds (lump sum) |
| Customer pays interest | No; eligible deposit earns interest | Yes, on the loan | No, but sale proceeds may be taxable as capital gains |
| Gold’s role | Deposited under the applicable scheme | Pledged as collateral | Sold outright; ownership transferred to the buyer |
| Tenure | STBD: 1-3 years | Depends on lender and loan product | One-time transaction; no tenure |
| Gold returned | According to applicable GMS redemption terms | Returned after the loan is fully repaid, subject to lender terms | No, ownership is permanently transferred |
Things to Consider Before Choosing the Gold Monetisation Scheme
Before depositing gold under GMS, consider:
- Tenure and Redemption: STBD has a tenure of one to three years. Check the applicable maturity, redemption, and premature closure terms.
- Participating Bank: Confirm that the bank currently offers STBD and understands its gold collection and testing process.
- Interest and Terms: Interest rates and payment frequency are determined by the participating bank, so review the current terms before depositing.
- Liquidity Needs: If you may need the physical gold soon, consider the applicable redemption and premature closure conditions.
- Sentimental Value: Gold jewellery is melted during the fire assay process and is not returned in its original form. So, avoid depositing gold with personal or sentimental value.
To Conclude
The Gold Monetisation Scheme can be an option for eligible individuals and entities holding unused physical gold and looking to put it to productive use. However, the current deposit structure, participating-bank availability, interest rate, tenure and redemption conditions should be checked before making a decision.
Frequently Asked Questions
Who is eligible for the Gold Monetisation Scheme?
Resident Indian individuals, HUFs, eligible proprietorship and partnership firms, trusts, companies, charitable institutions and certain government entities can make deposits under GMS. Eligibility and KYC requirements apply.
What is the minimum gold required for the scheme?
The minimum deposit at any one time is 10 grams of raw gold, including bars, coins and eligible jewellery excluding stones and other metals. The RBI states that there is no maximum deposit limit under the scheme.
Is the Gold Monetisation Scheme taxable?
The tax treatment of the Gold Monetisation Scheme depends on applicable government provisions and conditions. Certain tax benefits may apply to eligible gold deposits, subject to prevailing rules. Depositors should review the current tax provisions before choosing the scheme.
Is the Gold Monetisation Scheme the same as a Gold Loan?
No. GMS is a deposit mechanism through which eligible gold can potentially earn a return. A Gold Loan is a borrowing facility in which eligible gold is pledged as collateral against a loan.
Can gold be withdrawn before maturity?
For STBD, the applicable premature-closure provisions are determined by the designated bank. Depositors should therefore check the bank’s terms before opening the deposit.
Is the Gold Monetisation Scheme still available in India?
Yes. However, the Medium-Term Government Deposit and Long-Term Government Deposit components were discontinued for fresh mobilisation and renewal from March 26, 2025. Short-Term Bank Deposits continue under the scheme, subject to participating bank availability.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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