Skip to main content

Sovereign Gold Bonds vs Gold Monetization Scheme

You might have heard of Sovereign Gold Bonds (SGB) and Gold Monetisation Scheme (GMS). But what is the difference between the two?

 

 Sovereign Gold Bonds (SGBs) Gold Monetisation Scheme (GMS)
Meaning SGBs are issued by Reserve Bank of India (RBI) on behalf of the Government of India. They are issued as Government of India Stock in accordance with Section 3 of Government Securities Act, 2006. GMS was introduced by modifying the existing ‘Gold Deposit Scheme (GDS)’ and ‘Gold Metal Loan Scheme (GML)’.
GMS provides an opportunity to the eligible customers to deposit their gold with the designated banks and earn interest on such deposits.
Sellers / providers Sold through ‘Receiving Offices’ such as Scheduled Commercial banks (except Small Finance Banks and Payment Banks), Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE). All Scheduled Commercial Banks excluding RRBs are eligible to implement the Scheme.

 
Investors / depositors Eligible investors include individuals (including minors), HUFs, trusts, universities and charitable institutions. Resident Indians such as Individuals, HUFs, Proprietorship & Partnership firms, Trusts including Mutual Funds / Exchange Traded Funds, Companies, charitable institutions, Central Government, State Government or any other entity owned by Central / State Government, are eligible to make a deposit either singly or jointly with other eligible depositors.
Quantity

 

 Minimum investment – 1 gram.
Maximum limit – 4 Kg for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per financial year (April-March).
Annual ceiling includes SGBs subscribed under different tranches during initial issuance by Government and those purchased from Secondary Market (for eg. through stock exchanges).
In case of joint holding, the investment limit of 4 Kg applies to the first applicant only. 		Minimum deposit at any one time – 10 grams of raw gold (bars, coins, jewellery excluding stones and other metals).
No maximum limit for deposit.
Tenor 8 years

 

 Short Term Bank Deposit (STBD) – 1-3 years (with a facility of roll over).
Medium Term Government Deposit (MTGD)* – 5-7 years
Long Term Government Deposit (LTGD)* – 12-15 years
Allowed for broken periods (e.g. 2 years 4 months; 13 years 4 months 15 days; etc.).
Lock-in period Exit option after 5th year on the next interest payment date. STBD – determined by designated banks.
MTGD – 3 years
LTGD – 5 years
Liability Issued by RBI on behalf of the Central Government. STBD – treated as liability on the bank’s balance sheet.
MTGD & LTGD – accepted by the designated banks on behalf of the Central Government, hence, not reflected in the balance sheet of the designated banks.
Price / amount Price of SGB is fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association (IBJA) Limited for the last 3 working days of the week preceding the subscription period.
The issue price of SGBs is less by ₹50 per gram for those investors applying online and making payment through digital mode. 		The amount of deposit is equivalent to the value of 995 fineness gold in Indian Rupees at the time of deposit.
Interest rates 2.50% p.a. STBD – decided by designated banks.
MTGD & LTGD – decided by Central Government and notified by RBI. The current rates are –
MTGD – 2.25% p.a.
LTGD – 2.50% p.a.
Interest calculation On the nominal value (amount of initial investment). With reference to the value of gold in Indian Rupees at the time of deposit.
Interest denominated and paid in Indian Rupee only Indian Rupee only
Periodicity of interest payment Payable semi-annually STBD – on respective due dates and withdrawable periodically / at maturity.
MTGD & LTGD – Annual and paid on 31st March every year. Depositor has an option to receive payment of simple interest annually or cumulative interest (compounded annually) at the time of maturity.
Principal denominated in Gold Gold
Redemption of principal at maturity Redemption price is fixed in Indian Rupees based on simple average of closing price of gold of 999 purity, of previous 3 working days published by IBJA Ltd. At the option of the depositor, can be either in Indian Rupee equivalent of the value of deposited gold at the time of redemption, or in gold.
In case of MTGD & LTGD, if the redemption of the deposit is in gold, an administrative charge at 0.5% of notional redemption amount in terms of Indian Rupee is collected from the depositor.
Pre-mature withdrawal Redeemed in Indian Rupees only. STBD – designated banks may, at their discretion, allow whole / part premature withdrawal of the deposit subject to minimum lock-in period and penalties determined by them, redeemable in Indian Rupee equivalent or gold at the discretion of the designated banks.
MTGD & LTGD – pre-mature redemption in Indian Rupee only.
Trading

 

 Can be traded in the secondary market through stock exchanges. Cannot be traded.
Commission to banks / institutions Commission for distribution of SGBs is paid at 1% of the total subscription received by the receiving offices and receiving offices are required to share at least 50% of the commission so received with the agents / sub agents for the business procured through them. MTGD & LTGD – designated banks are paid handling charges (including gold purity testing, refining, transportation, storage and any other relevant costs) for new deposits at 1.5% and commission for new and renewed deposits at 1% of the rupee equivalent of the amount of gold mobilized for MLTGD.
Loans Can be used as collateral for loans. Loan to Value (LTV) ratio is same as applicable to any ordinary gold loan. Rupee loans can be availed against the collateral of deposits.

(Updated on March 25, 2025)

*Government of India has discontinued the MLTGD components of GMS with effect from March 26, 2025. Accordingly, any gold deposits tendered at the designated Collection and Purity Testing Centre (CPTC) or GMS Mobilisation, Collection & Testing Agent (GMCTA) or the designated bank branches towards MLTGD component of GMS shall not be accepted after March 25, 2025. The designated banks, at their discretion, may offer STBD under GMS. The MLTGD mobilized till March 25, 2025 shall continue till redemption.


References

Reserve Bank of India. (2015, October 22). 'Gold Monetization Scheme, 2015 (Updated as on August 04, 2022)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10084&

Reserve Bank of India. (2021, October 21). 'Sovereign Gold Bond Scheme 2021-22'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52440

Reserve Bank of India. (2021, October 22). 'Sovereign Gold Bond Scheme of the Government of India (GoI) - Procedural Guidelines - Consolidated'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12181&Mode=0

Reserve Bank of India. (2022, March 29). 'FAQ-Gold Monetisation Scheme, 2015'. Retrieved from https://rbi.org.in/Scripts/FAQView.aspx?Id=110

Reserve Bank of India. (2025, March 25). 'Gold Monetization Scheme (GMS), 2015 - Amendment'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12801&Mode=0


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Payment of Agency Commission to Agency Banks (ABs) and Disbursement of Government Pension by ABs

Reserve Bank of India (RBI) has issued guidelines on the conduct of Government business by Agency Banks (ABs), payment of agency commission to ABs and disbursement of Government pension by ABs. Who are ABs? ABs mean all Public Sector Banks (PSBs), scheduled Private Sector Banks (PVBs), scheduled Payments Banks (PBs), and scheduled Small Finance Banks (SFBs) appointed by the RBI under Section 45 of the RBI Act, 1934, by mutual agreement, to carry out Government banking business of the Central Government (CG) / State Governments (SGs). What is agency commission? Agency commission means the remuneration paid by the RBI to an AB in consideration of it acting as an agent of the RBI in the conduct of general banking business of the CG and the SGs at the places and in the manner specified in the agreement between the RBI and the bank, with the exception of the functions relating to the management of the public debt. What are the guidelines on appointment of ABs? Any eligible bank which intend...
Post a Comment
Read more

Credit Cards and Debit Cards

Reserve Bank of India (RBI) has issued directions on issuance of credit cards and debit cards. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Non-Banking Financial Companies (NBFCs) for all layers – NBFC-Investment and Credit Companies (NBFC-ICC) NBFC-Factor  NBFC-Micro Finance Institutions (NBFC-MFI)  Housing Finance Company (HFC)  What is a credit card? Credit Card is a physical / virtual payment instrument issued with a pre-approved revolving credit limit that can be used to purchase goods and services or draw cash advances. What is a debit card? Debit Card is a physical / virtual payment instrument linked to a Savings Bank / Current Account which can be used to withdraw cash, make online payments, do Point of Sale (PoS) terminal / Quick Response (QR) code transactions, fund transfer, e...
Post a Comment
Read more

Deposits between a person resident in India and a person resident outside India

Reserve Bank of India (RBI) has updated the regulations on deposits between a person resident in India and a person resident outside India. What are the restrictions on deposits between a person resident in India and a person resident outside India? No person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India. However, the following deposits are exempted – Deposits held in rupee accounts maintained by foreign diplomatic missions and diplomatic personnel and their family members in India with an authorised dealer. Deposits held by diplomatic missions and diplomatic personnel in special rupee accounts namely Diplomatic Bond Stores Account to facilitate purchases of bonded stocks from firms and companies who have been granted special facilities by customs authorities for import of stores into bond. The funds in the account may be repatriated outside India without the approval of the RBI. Deposits held in accounts maintained in foreig...
Post a Comment
Read more

Credit Derivatives

Reserve Bank of India (RBI) has issued directions on credit derivatives. What is Credit Derivative? Credit derivative means a derivative contract whose value is derived from the credit risk of an underlying debt instrument or an index of underlying debt instruments. What is Credit Default Swap (CDS) and Total Return Swap (TRS)? Credit Default Swap (CDS) means a credit derivative contract in which one counterparty (protection seller) commits to pay to the other counterparty (protection buyer) in the case of a credit event with respect to a reference entity and in return, the protection buyer makes periodic payments (premium) to the protection seller until the maturity of the contract or the credit event, whichever is earlier. Total Return Swap (TRS) means a credit derivative contract under which one counterparty (total return payer) commits to transfer the entire economic performance of a reference asset to the other counterparty (total return receiver), and, in return, receives a pre-d...
Post a Comment
Read more

Special Rupee Vostro Accounts (SRVAs)

Reserve Bank of India (RBI) has consolidated the guidelines governing Special Rupee Vostro Accounts (SRVAs). Who can open and maintain Special Rupee Vostro Accounts (SRVAs)? Authorised Dealer (AD) banks in India may open Special Rupee Vostro Accounts (SRVAs) of its branch outside India or a bank resident outside India. Which transactions can be settled through SRVA? The settlement of cross-border trade transactions through SRVA is an additional arrangement for invoicing, payment and settlement of exports and imports in Indian Rupee (INR).  All permissible capital and current account transactions under Foreign Exchange Management Act (FEMA) may be settled through the SRVA.  AD banks maintaining SRVA are permitted to open additional current account for exporter / importer, exclusively for settlement of export / import transactions. What can be the source and use of funds in SRVA? SRVA may be funded by way of inward remittances or transfer from other repatriable INR accounts in t...
Post a Comment
Read more