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What is Gold Monetization Scheme?

Want your idle Gold Jewellery to earn some income? Gold Monetisation Scheme can make it possible.

Gold Monetisation Scheme (GMS)

Gold Monetization Scheme (GMS) was introduced by modifying the existing ‘Gold Deposit Scheme (GDS)’ and ‘Gold Metal Loan Scheme (GML)’, to mobilise gold held by households and institutions of the country and facilitate its use for productive purposes, and in the long run, to reduce the country’s reliance on the import of gold.

GMS provides an opportunity to the eligible customers to deposit their gold with the designated banks and earn interest on such deposits.

Providers and depositors of GMS

All Scheduled Commercial Banks excluding RRBs are eligible to implement the Scheme.

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 of deposits under GMS

  • Minimum deposit at any one time shall be 10 grams of raw gold (bars, coins, jewellery excluding stones and other metals). 
  • No maximum limit for deposit.

Types of deposits under GMS

  • Short Term Bank Deposit (STBD)
  • Medium and Long Term Government Deposit (MLTGD)

 

 Short Term Bank Deposit (STBD) Medium and Long Term Government Deposit (MLTGD)
Tenor 1-3 years (with a facility of roll over).
Allowed for broken periods (e.g. 1 year 3 months; 2 years 4 months 5 days; etc.). 		Medium-term – 5-7 years
Long term – 12-15 years
Allowed for broken periods (e.g. 5 years 7 months; 13 years 4 months 15 days; etc.).
Lock-in period Determined by designated banks. Medium Term Government Deposit (MTGD) – 3 years
Long Term Government Deposit (LTGD) – 5 years
Liability Treated as liability on the bank’s balance sheet. Accepted by the designated banks on behalf of the Central Government, hence, not reflected in the balance sheet of the designated banks.
Interest rates Decided by designated banks. Decided by Central Government and notified by RBI. The current rates of interest are –
MTGD – 2.25% p.a.
LTGD – 2.50% p.a.
Interest calculation With reference to the value of gold in Indian Rupees at the time of deposit. 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 On the respective due dates and withdrawable periodically / at maturity. 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. The option to be exercised at the time of deposit.
Principal denominated in Gold Gold
Redemption of principal at maturity 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. The option to be exercised at the time of deposit and is irrevocable. 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. The option to be exercised at the time of deposit.
Where the redemption of the deposit is in gold, an administrative charge at a rate of 0.5% of notional redemption amount in terms of Indian Rupee is collected from the depositor.
Pre-mature withdrawal The 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.
Premature redemption is in Indian Rupee equivalent or gold at the discretion of the designated banks. 		Pre-mature redemption in Indian Rupee only.
Commission to designated banks

-

 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 Rupee loans can be availed against the collateral of deposits. Rupee loans can be availed against the collateral of deposits.

What are interest rates for pre-mature redemption of MTGD and LTGD?

The amount payable to the depositor on premature withdrawal is calculated as a sum of (A) and (B) below – 

(A) Actual market value of the gold deposit on the day of withdrawal.

(B) Interest payable on the value of the gold at the time of deposit as under –

Medium Term Government Deposit (MTGD)
Reason for pre-mature redemption (after lock-in period of 3 years) Actual period for which the deposit has run (years)
>3 and < 5 ≥5 and < 7
- MTGD rate (-) 0.375% MTGD rate (-) 0.25%
Death MTGD rate (-) 0.25% MTGD rate (-) 0.125%
Default of loan taken against MTGD MTGD rate (-) 0.375% MTGD rate (-) 0.25%

 

Long Term Government Deposit (LTGD)
Reason for pre-mature redemption (after lock-in period of 5 years) Actual period for which the deposit has run (years)
>5 and < 7 ≥ 7 and < 12 ≥12 and < 15
- MTGD rate (-) 0.25% LTGD rate (-) 0.375% LTGD rate (-) 0.25%
Death MTGD rate (-) 0.125% LTGD rate (-) 0.25% LTGD rate (-) 0.125%
Default of loan taken against LTGD MTGD rate (-) 0.25% LTGD rate (-) 0.375% LTGD rate (-) 0.25%

 

Medium Term Government Deposit (MTGD)
Reason for pre-mature redemption (before lock-in period of 3 years) Actual period for which the deposit has run

Up to 6 months

 >6 months and <1 year ≥1 year and <2 years ≥2 years and <3 years
Death No interest MTGD (-) 1.25% MTGD rate (-) 1.00% MTGD rate (-) 0.75%
Default of loan taken against MTGD

No interest

 MTGD (-) 1.375% MTGD rate (-) 1.125% MTGD rate (-) 0.875%


Long Term Government Deposit (LTGD)
Reason for pre-mature redemption (before lock-in period of 5 years) Actual period for which the deposit has run
Up to 1 year >1 year and <2 years ≥2 years and <3 years ≥3 years and <5 years
Death No interest MTGD rate (-) 1.00% MTGD rate (-) 0.75% MTGD rate (-) 0.25%
Default of loan taken against LTGD No interest MTGD rate (-) 1.125% MTGD rate (-) 0.875%

MTGD rate (-) 0.375%

Procedure for a customer to make a deposit under GMS

  • An eligible depositor can open a Gold Deposit Account with any of the designated banks after meeting the KYC norms. 
  • Deposits can be made at CPTC / GMCTA which would then test the purity of the customers’ gold in their presence and issue deposit receipts of the standard gold of 995 fineness to the depositor and inform the customers’ respective bank about acceptance of deposit. 
  • The designated bank credits STBD / MLTGD account of the customer with the amount of 995 fineness gold, either on the same day of receipt of deposit receipt by the depositor or within 30 days of deposit of gold at CPTC / GMCTA (regardless of whether the depositor submits the receipt or not), whichever is earlier.


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


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