Key Points:
- The Gold Monetisation Scheme (GMS), launched in 2015, has been discontinued for medium and long-term deposits as of March 26, 2025.
- Short-term deposits (1-3 years) under GMS will continue, but banks will now decide interest rates independently.
- Existing medium and long-term gold deposits remain safe, with interest and redemption terms unchanged.
- The scheme aimed to mobilize idle gold in households, institutions, and temples for productive use.
- Depositors could earn interest on gold investments, which were taxable under capital gains and income tax laws.
New Delhi: The Indian government has officially discontinued the Gold Monetisation Scheme (GMS) for medium and long-term deposits, effective March 26, 2025. Announced by the Finance Ministry on March 25, the decision marks a significant shift in the country’s gold investment landscape. While short-term deposits under the scheme will continue, banks will now have the autonomy to set interest rates based on commercial viability rather than government directives.
What Happens to Existing Gold Deposits?
For those who have already deposited gold in medium or long-term schemes, there’s no need to worry. The Reserve Bank of India (RBI) has clarified that existing deposits will remain secure and continue earning interest until maturity as per their original terms. Depositors will still have the option to redeem their investments either in gold or rupees upon maturity.
However, from March 26 onward, no new investments will be accepted under medium and long-term deposit categories. Short-term deposits (1-3 years) are still available, but interest rates will now be determined by individual banks rather than standardized by the government.
How Did the Gold Monetisation Scheme Work?
Launched in September 2015, the Gold Monetisation Scheme aimed to mobilize idle gold stored in households, institutions, and temples across India and put it to productive use. Under this scheme:
- Minimum Deposit: A depositor could invest a minimum of 10 grams of gold (jewelry, coins, or bars).
- Certification: After depositing gold at Collection and Purity Testing Centers (CPTCs), a certificate equivalent to gold of 995 purity was issued.
- Investment Periods: The scheme offered three deposit periods:
- Short-term bank deposits (1-3 years)
- Medium-term deposits (5-7 years)
- Long-term deposits (12-15 years)
- Returns: Medium and long-term deposits earned annual interest rates between 2.25% and 2.5%, making it a better alternative to storing gold in lockers without returns. Interest earned was taxable under capital gains tax laws, along with income tax on appreciation value.
Depositors could choose to redeem their investments either in physical gold or its monetary equivalent upon maturity.
Why Was GMS Discontinued for Medium and Long-Term Deposits?
The government’s decision to discontinue medium and long-term deposits under GMS is believed to stem from declining participation in these categories due to lower returns compared to other investment options. Additionally, managing these longer-duration schemes posed administrative challenges for banks and the government alike.
The focus has now shifted toward short-term deposits, which are seen as more commercially viable for banks while still providing an avenue for individuals to earn returns on their idle gold.
Impact on Depositors and Industry
While existing depositors remain unaffected by the change, new investors looking for medium or long-term options will need to explore alternatives such as Sovereign Gold Bonds or physical gold investments. Banks are expected to offer competitive interest rates for short-term deposits under GMS to attract customers.
India’s massive reserve of household gold estimated to exceed the combined reserves of the world’s top 10 banks remains a largely untapped resource. Experts suggest that discontinuing medium and long-term schemes may limit opportunities for mobilizing this wealth effectively.
The discontinuation of medium and long-term deposits under the Gold Monetisation Scheme signals a shift in India’s approach toward leveraging its vast reserves of idle gold. While short-term deposits continue to offer an avenue for earning returns, investors may need to weigh alternative options for longer durations. For existing depositors, however, the assurance from RBI ensures that their investments remain safe with full benefits intact until maturity.
As India redefines its strategy around gold monetization, this move highlights evolving priorities in balancing economic productivity with investor convenience.
