Gold Monetisation Scheme (GMS)

Source:  TOI

Context: The Finance Ministry has discontinued the Gold Monetisation Scheme (GMS) for medium- and long-term deposits from March 26, 2025.

• RBI has clarified that existing deposits will continue until maturity; however, no fresh mobilisations or renewals will be allowed.

About Gold Monetisation Scheme (GMS):

• What is GMS?

• • A scheme to mobilise idle gold held by individuals and institutions, launched to integrate gold into the formal financial system.

• Launch Year: November 2015, as a revamped version of the Gold Deposit Scheme (1999).
• Implemented by: Jointly by Ministry of Finance, RBI, and scheduled commercial banks.
• Objective: To reduce gold imports and curb Current Account Deficit (CAD) by monetising household and institutional gold.
• Categories under the Scheme:

• • Short-Term Bank Deposit (STBD):
    • Tenure: 1 to 3 years
    • Interest: Decided and paid by banks
  • Medium-Term Government Deposit (MTGD):
    • Tenure: 5 to 7 years
    • Interest: Fixed by GoI in consultation with RBI (2.25%)
  • Long-Term Government Deposit (LTGD):
    • Tenure: 12 to 15 years
    • Interest: Fixed by GoI (2.5%)

• Features of Gold Monetisation Scheme (GMS):

• • Minimum Deposit: 10 grams of gold (bars, coins, jewellery excluding stones/metals). Only gold items without embedded gems or other metals are accepted to ensure purity.
  • No Upper Limit for Deposit: Individuals and institutions can deposit any quantity of gold without restrictions.
  • Interest Earned in Gold, Not Rupees: Returns are credited in grams of gold, protecting investors from currency fluctuations.
  • Purity Verification through CPTCs (Collection & Purity Testing Centres): Authorized centres test and certify gold quality before deposit to maintain transparency.
  • Tax Exemption on Interest Under Income Tax Act: Interest earned is tax-free, making it a lucrative savings option for gold holders.

• Government’s Recent Decision on GMS (Effective March 26, 2025)

• • Medium- & Long-Term Deposits Discontinued: Only short-term deposits (1-3 years) will continue, based on bank policies.
  • Short-Term Bank Deposits to Continue at Banks’ Discretion: Banks can choose whether to offer these deposits, subject to RBI guidelines.
  • No Fresh Deposits or Renewals Accepted: Existing accounts remain active, but no new deposits or rollovers permitted.
  • Existing Deposits to Mature as per RBI Guidelines: Previously made deposits will continue until maturity without premature withdrawal penalties.