Gold Monetisation Scheme (GMS)

In Indian households, over 20,000 tonnes of gold is lying idle. To turn this unused gold into a productive asset, the Government of India launched the Gold Monetisation Scheme (GMS). The scheme was launched by the Prime Minister of India in 2015 with an aim to mobilise gold and facilitate its use for productive purposes, which further will also help in reducing India’s dependability on gold imports. The scheme will also benefit jewellers by allowing them to obtain loans. Lending institutions such as banks and NBFCs too will be able to monetise this gold.

In the Union Budget (2015-16) speech, the government had announced to replace the existing Gold Deposit Scheme (GDS) (1999) and Gold Metal Loan (GML) Scheme (1998). But as GMS is a combination of the best features of both the schemes, RBI in a notification later clarified that GMS would include revamped GDS as well as GML. In the guidelines, the central bank has further clarified that the GMS will replace the existing GDS (1999) but the deposits outstanding under GDS will continue to run until maturity unless prematurely withdrawn by the depositors. Another important point mentioned in the notification is that the existing GML scheme will continue to run parallel to the GMS linked GML.

What is Gold Monetisation Scheme (GMS)?

Gold Monetisation Scheme was launched by Government of India in 2015, under this scheme one can deposit their gold in any form in a GMS account to earn interest as the price of the gold metal goes up.

Gold Monetisation Scheme Benefits

The benefits of gold monetisation scheme are:

• Mobilise idle gold: The scheme will help in mobilizing gold that has been lying idle in the confined spaces of households, trusts, and other institutions in India. The movement of gold in the national market will further benefit the Indian gems and jewellery sector which is a major contributor to India’s exports.
• Earn interest: Gold lying in your bank lockers or household does not earn you anything. In fact, when you store gold in a bank locker, it costs you bank locker charges to keep it safe. The gold monetisation scheme will help you earn interest on your gold deposits, which will add to your savings.
• Avail secured storage: Bank lockers are hard to get. Opening a gold deposit account with a bank will eliminate your tension regarding gold storage. Once you deposit your gold possessions, your bank will keep it secured and safe.
• Enjoy tax benefit: The earnings on the gold monetisation scheme are exempted from capital gains tax, wealth tax, and income tax. Even when the value of your gold deposit appreciates, capital gains tax will not be levied on it or on the interest you earn from it.
• Get flexibility on redemption: The gold depositor has the option to take either cash or gold on redemption. However, the redemption preference has to be mentioned at the time of deposit.
• Reduce the government’s reliance on gold imports: The mobilised gold will also supplement the RBI’s (Reserve Bank of India) gold reserves. It will also help the government in reducing the Government’s cost of borrowing. In the long run, it is also expected to decreases India’s dependency on gold imports.

1. Revamped Gold Deposit Scheme (R-GDS)

GMS includes the R-GDS. The scheme will be available at all banks. All the deposits under the scheme shall be made at the CPTC (Collection and Purity Testing Centre). The deposits made under the scheme will start accruing interest from the date of conversion of gold deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the CPTC or the bank’s designated branch, as the case may be, whichever is earlier. Other features of the scheme are:

R-GDS Eligibility Criteria

All resident Indians are eligible for the Revamped Gold Deposit Scheme. This includes:

• Individuals – singly or jointly (as Former or Survivor)
• HUFs (Hindu Undivided Families)
• Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies)
• Proprietorship & Partnership firms
• Charitable institutions
• Central government, state government or any other entity owned by the central government or the state government

Gold Deposit Scheme Types

There are 3 types of deposits under GMS:

• Short Term Gold Deposit (STGD)
• Medium Term Gold Deposit (MTGD)
• Long Term Gold Deposit (LTGD)

More Features on the Scheme

Particulars	MTGD	LTGD	STGD
Tenure	5-7 years	12-15 years	1-3 years
Minimum Deposit Amt.	30 grams of gold in the form of bars, coins and jewellery (excluding stones and other metals)
Maximum Deposit Amt.	No Limit
Interest Rate	2.25% p.a.	2.50% p.a.	At the bank’s discretion
Deposit Held	By the bank on behalf of the Central Government		In the bank’s books
Minimum Lock-in Period	3 years	5 years	At the bank’s discretion
Principal (Denomination)	Grams of 995 fine gold	Grams of 995 fine gold	Grams of 995 fine gold
Interest (Denomination)	Indian Rupees (as per gold’s value prevailing on the date of creation of deposit)	Indian Rupees (as per gold’s value prevailing on the date of creation of deposit)	Gold
Principal and Interest Redemption (Denomination)	P & I – Indian Rupees P will be paid on the value of gold prevailing at the time of maturity		P & I – Gold or Indian Rupees (option to be stated when placing the deposit)
Interest Payment	Annually on 31st March or Maturity (whichever is earlier)
Nomination facility	Available for deposits in single names in an individual capacity

Note: The figures given in the table are indicative and are subject to change at the banks’ or RBI’s (Reserve Bank of India) discretion without prior information.

2. Revamped Gold Metal Loan (GML) Scheme

The Gold Metal Loan Scheme started in the year 1998. However, it was not a big hit among Indians. The government revamped the scheme by introducing some of its great features in GMS. Most people think that besides replacing GDS, GMS also replaced GML. But as per the RBI’s notification, the existing GML scheme will continue to run parallel to the GMS linked GML.

Features of GMS linked GML

• The gold mobilised under the Short Term Bank Deposit (STBD) might be given to jewellers as Gold Metal Loan. The designated banks can also buy the gold auctioned under the MLTGD (Medium and Long Term Gold Deposit)
• The jewellers will get the gold delivered physically either from the designated bank or from the refiners, depends on the location where the refined gold is stored.
• The nominated banks, as well as the designated banks, will be eligible to import gold only for the redemption of the gold deposits mobilised under STBD.
• RBI has given freedom to the designated banks to determine the interest rate for the GMS-linked GML.
• The tenure of the GMS-linked GML will be same as the tenure of the existing GML scheme.