The Gold Monetisation Scheme (GMS) was launched in November 2015 by the Government of India. It was designed as an improved version of earlier schemes like the Gold Deposit Scheme (GDS) and the Gold Metal Loan (GML) Scheme.
The primary goal of GMS was to mobilize idle gold lying with households, temple trusts, and institutions and bring it into the formal economy. By doing so, India aimed to reduce its dependence on gold imports and improve its Current Account Deficit (CAD).
Under this scheme, individuals and institutions could deposit their idle gold in banks and earn interest on it, instead of keeping it locked away in lockers or homes. On maturity, the depositor could redeem the gold in cash or standard gold bars/coins.
Why was the Gold Monetisation Scheme Launched?
India is one of the largest importers of gold in the world. Each year, households and institutions buy gold for savings, investment, or cultural reasons. However, a large portion of this gold remains idle and does not contribute to economic productivity.
- To mobilize idle gold and put it to productive use.
- To reduce gold imports and ease the burden on India’s balance of payments.
- To provide households and institutions with an opportunity to earn interest on their idle gold.
- To create a formal channel for recycling gold within the economy.
What were the Components of the Gold Monetisation Scheme?
The Gold Monetisation Scheme initially had three deposit categories:
| Type of Deposit | Tenure & Interest Rate | Redemption & Purpose |
| Short-Term Bank Deposit (STBD) | 1–3 years, Variable (decided by banks) | Cash or gold; used by banks for lending or domestic needs |
| Medium-Term Government Deposit (MTGD) | 5–7 years, ~2.25% | Cash only; used by government and RBI for reserves |
| Long-Term Government Deposit (LTGD) | 12–15 years, ~2.5% | Cash only; used for monetary policy and gold reserves |
Why were MTGD and LTGD Discontinued?
On 26th March 2025, the Union Government decided to discontinue Medium-Term and Long-Term Government Deposits (MLTGD) under the Gold Monetisation Scheme.
- The response to MLTGD was low compared to expectations.
- Evolving market conditions made the scheme less effective.
- The administrative costs were high compared to the benefits.
However, Short-Term Bank Deposits (STBD) will continue to be offered by banks, allowing depositors to earn interest on gold for shorter periods.
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Who was Eligible under the Gold Monetisation Scheme?
Eligibility criteria included:
- Resident individuals (above 18 years).
- Trusts and institutions, including temple trusts.
- Companies and firms.
- Government entities.
- Hindu Undivided Families (HUFs).
- Non-Resident Indians (NRIs) were allowed to participate in certain categories, like Sovereign Gold Bonds (SGBs), but not in all GMS deposits.
Basic KYC documents like Aadhaar, PAN, and details of deposited gold were required.
What were the Benefits of the Gold Monetisation Scheme?
The benefits of the gold menotisation scheme are as follows:
- Earn interest on idle gold.
- Tax exemptions on interest and capital gains.
- Safe storage in bank/refinery vaults.
- Withdraw gold/cash after maturity or prematurely.
- Loans up to 75% of gold value.
- Gold valued at international LBMA prices.
Also Check: List of Government Schemes of India
What were the Challenges Faced by the Scheme?
Despite its objectives, the scheme faced multiple hurdles:
- Cultural and emotional attachment: Households were reluctant to part with jewellery due to traditional and sentimental value.
- Awareness gap: Many people were unaware of the scheme’s benefits.
- Low interest rates: Returns were seen as unattractive compared to potential appreciation in gold prices.
- Certification issues: Limited BIS-certified refineries and jewelers made gold testing difficult.
- Fear of taxation: Lack of purchase receipts discouraged households from depositing gold.
- Reluctance of banks: Banks did not actively promote the scheme due to low profitability.
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How is the Gold Monetisation Scheme different from Sovereign Gold Bonds?
The features based on the differences between the gold monetization scheme and the soverign gold bonds are as follows:
| Feature | Gold Monetisation Scheme (GMS) | Sovereign Gold Bonds (SGB) |
| Launched | 2015 | 2015 |
| Nature | Deposit scheme for idle gold | Financial instrument (bond) |
| Return | Interest (2–3%) + gold value | 2.5% interest + gold price appreciation |
| Redemption | Cash or gold (bars/coins) | Cash only |
| Objective | Mobilize idle gold | Reduce demand for physical gold |
| Eligibility | Individuals, HUFs, trusts, companies, institutions | Resident individuals, HUFs, trusts, universities, and charitable institutions |
Key Takeaway Table
| Aspect | Details |
| Launched | November 2015 |
| Administered by | Ministry of Finance, RBI |
| Objective | Mobilize idle gold, reduce imports, ease CAD |
| Components | STBD (1–3 years), MTGD (5–7 years), LTGD (12–15 years) |
| Interest Rates | STBD – variable (banks), MTGD – 2.25%, LTGD – 2.5% |
| Redemption | STBD – gold/cash; MTGD & LTGD – cash only |
| Eligibility | Individuals, HUFs, trusts, companies, govt entities |
| Tax Benefits | Exemption from income tax, wealth tax, and capital gains tax |
| Status (2025) | MTGD and LTGD discontinued; STBD continues |
Questions on Gold Monetisation Scheme
Q1. The Gold Monetisation Scheme was launched in which year?
a) 2010
b) 2013
c) 2015
d) 2017
e) 2020
Answer: c) 2015
Q2. Which ministry administers the Gold Monetisation Scheme?
a) Ministry of Commerce and Industry
b) Ministry of Finance
c) Ministry of Rural Development
d) Ministry of Consumer Affairs
e) Ministry of Corporate Affairs
Answer: b) Ministry of Finance
Q3. What was the interest rate for Long-Term Government Deposits (LTGD) under GMS?
a) 1%
b) 1.5%
c) 2%
d) 2.5%
e) 3%
Answer: d) 2.5%
Q4. Which components of GMS were discontinued in March 2025?
a) Only STBD
b) Only LTGD
c) MTGD and LTGD
d) STBD and MTGD
e) None of the above
Answer: c) MTGD and LTGD
Q5. Under GMS, who was eligible to deposit gold?
a) Only individuals
b) Only government institutions
c) Only HUFs
d) Individuals, HUFs, trusts, institutions, government entities
e) Only NRIs
Answer: d) Individuals, HUFs, trusts, institutions, government entities
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Q6. Which of the following is NOT a feature of GMS?
a) Premature withdrawal allowed
b) Interest exempt from income tax
c) Redemption in jewellery form
d) Loans up to 75% of value allowed
e) Gold valued at international prices
Answer: c) Redemption in jewellery form
Q7. What was the main objective of GMS?
a) Increase gold imports
b) Reduce fiscal deficit
c) Mobilize idle gold and reduce imports
d) Promote agricultural exports
e) Support only urban savings
Answer: c) Mobilize idle gold and reduce imports
Q8. The Indian Gold Coin Initiative was launched alongside which schemes in 2015?
a) GMS and PMJDY
b) SGB and GMS
c) NPS and APY
d) PMSBY and PMJJBY
e) UDAY and GMS
Answer: b) SGB and GMS
Q9. Which body decides the interest rate for Short-Term Bank Deposits under GMS?
a) RBI
b) Union Government
c) Banks themselves
d) NITI Aayog
e) SEBI
Answer: c) Banks themselves
Q10. Which of the following is true about Sovereign Gold Bonds (SGBs)?
a) They are issued in jewellery form
b) They provide 2.5% interest + gold price appreciation
c) They are exempt from all taxes
d) They can be redeemed in gold coins only
e) They were launched in 2010
Answer: b) They provide 2.5% interest + gold price appreciation
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