Why in news?

The government has discontinued the Gold Monetisation Scheme’s medium- and long-term deposits from March 26, citing market conditions and scheme performance.

However, short-term deposits will continue at the discretion of banks based on commercial viability.

What’s in Today’s Article?

• Gold Monetisation Scheme (GMS): An Overview
• Government and RBI on Gold Monetisation Scheme Closure
• Gold Mobilised Under the Gold Monetisation Scheme
• Status of Other Gold Schemes in India

Gold Monetisation Scheme (GMS): An Overview

• Introduced in November 2015, the GMS aimed to make idle gold productive by allowing individuals and institutions to sell or deposit gold with banks.
• The goal was to integrate gold into the formal economy, reduce gold imports, and lower the current account deficit.
• It was a revamped version of the earlier Gold Deposit Scheme.
• Key Features
  • Allowed deposits from households, trusts, and institutions.
  • Minimum deposit: 10 gm of raw gold (bars, coins, jewellery without stones/metals).
  • No maximum deposit limit.
• Three Deposit Categories
  • Short-term bank deposits (1-3 years) – Managed by banks.
  • Medium-term government deposits (5-7 years) – Managed by the government.
  • Long-term government deposits (12-15 years) – Managed by the government.
• Gold Monetisation Scheme: Interest Rates
  • Short-Term Deposits
    • Interest rates were determined by banks based on international lease rates, market conditions, and other costs.
    • Interest was borne by the banks.
  • Medium- and Long-Term Deposits
    • Interest rates were set by the government in consultation with the RBI.
    • Interest was paid by the Central government.
    • Medium-term deposits (5-7 years):25% per annum
    • Long-term deposits (12-15 years):5% per annum

Government and RBI on Gold Monetisation Scheme Closure

• Discontinuation of the Scheme
  • The Ministry of Finance announced the discontinuation of Medium- and Long-Term Government Deposits (MLTGD) under the GMS from March 26, 2025.
  • Only short-term deposits managed by banks will continue.
  • From March 26, 2025, no new deposits will be accepted at collection centers, testing agents, or designated bank branches.
• Impact on Existing Deposits
  • Existing medium- and long-term deposits remain unaffected and will continue until maturity unless withdrawn prematurely.
  • The RBI has not issued a separate release but has updated the scheme details on its website.
• RBI Guidelines
  • The RBI will issue detailed guidelines regarding the scheme’s closure.
  • It confirmed that the renewal of medium- and long-term deposits has been discontinued from March 26, 2025.

Gold Mobilised Under the Gold Monetisation Scheme

• Total Gold Collected - As of November 2024, a total of 31,164 kg of gold was mobilised under the scheme.
• Breakdown by Deposit Type
  • Short-term deposits: 7,509 kg
  • Medium-term deposits: 9,728 kg
  • Long-term deposits: 13,926 kg
• Depositor Participation - Total depositors: 5,693
• Gold Collection from Different Sources
  • From individuals/HUFs (FY 2016-17 & 2017-18): 1,134 kg
  • From temples, trusts, mutual funds, gold ETFs, and firms: 10,872 kg

Status of Other Gold Schemes in India

• Gold Monetisation Scheme (GMS) Closure
  • The GMS is the second gold-related scheme to be discontinued after the halt on sovereign gold bonds.
  • The decision comes amid a sharp rise in gold prices, which increased by 41.5% from ₹63,920 per 10 gm (Jan 1, 2024) to ₹90,450 per 10 gm (March 25, 2025).
• Sovereign Gold Bonds (SGB) Discontinued
  • The government stopped fresh issuance of sovereign gold bonds and did not announce any new tranche in Budget 2025-26.
  • Reason: SGBs were considered a high-cost borrowing for the government.
• Government’s Gold Strategy
  • Officials had earlier stated that SGBs aimed to boost gold investment, but the cut in gold import duty (Budget 2024-25) already aligned with this goal and helped increase demand.