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%)

• Short-Term Bank Deposit (STBD): Tenure: 1 to 3 years Interest: Decided and paid by banks

• 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%)

• 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%)

• 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.

• 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.

• 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.