The Indian government has decided to stop the Gold Monetisation Scheme (GMS) starting from March 26, 2025, according to a recent announcement by the Finance Ministry. This decision has been taken after evaluating the performance of the scheme and considering current market conditions. However, banks may continue offering short-term gold deposit schemes based on their commercial viability.
The Gold Monetisation Scheme (GMS) was introduced on September 15, 2015, with two main goals:
- Reducing Gold Imports: India has historically relied heavily on gold imports, and GMS aimed to lower this dependency.
- Utilising Idle Gold Productively: Many households and institutions in India hold large amounts of gold as jewelry or savings. The scheme encouraged people to deposit their gold so it could be used for productive purposes instead of lying idle.
Components of the Gold Monetisation Scheme
The GMS had three types of deposit plans:
- Short-Term Bank Deposits (STBD) – For 1 to 3 years.
- Medium-Term Government Deposits (MTGD) – For 5 to 7 years.
- Long-Term Government Deposits (LTGD) – For 12 to 15 years.
While the government is discontinuing the Medium-Term and Long-Term Deposit plans from March 26, 2025, banks will still be allowed to offer Short-Term Bank Deposits (STBD) based on their discretion and commercial assessment.
How Much Gold Was Mobilised?
Since its launch in 2015, the Gold Monetisation Scheme has mobilised 31,164 kilograms of gold as of November 2024. This gold came from 5,693 depositors across the country.
Here’s how the total deposits were divided:
- Short-Term Deposits (STBD): 7,509 kilograms
- Medium-Term Deposits (MTGD): 9,728 kilograms
- Long-Term Deposits (LTGD): 13,926 kilograms
What Happens Next?
The Finance Ministry has clarified that any new deposits under the Medium-Term or Long-Term Deposits will no longer be accepted after March 26, 2025. However, existing deposits in these categories will continue until their maturity, as per the current guidelines.
The Reserve Bank of India (RBI) will issue detailed instructions to banks on how to manage short-term deposits under the revised framework.
The decision to discontinue GMS comes at a time when gold prices have increased significantly. From January 1, 2024, when gold was priced at Rs 63,920 per 10 grams, the price has risen by Rs 26,530, reaching Rs 90,450 per 10 grams as of March 25, 2025. This sharp 41.5% increase in gold prices may have influenced the evolving dynamics of gold investment and market demand.
What Should Investors Know?
- Short-Term Gold Deposits will still be available, depending on individual banks.
- Medium-Term and Long-Term Deposits will be discontinued after March 26, 2025.
- Existing deposits will remain valid until their redemption date.
- Investors should keep an eye on further announcements from the RBI regarding detailed guidelines.
Conclusion
The discontinuation of the Gold Monetisation Scheme marks a significant shift in India’s gold investment landscape. While the scheme aimed to unlock idle gold and reduce import reliance, the evolving market conditions have led to its partial closure. Investors looking to monetise their gold can still explore short-term gold deposit options offered by banks or consider other gold investment alternatives.
