Gold Monetization Schemes

On September 9, 2015, the Union Cabinet presided by the Prime Minister Narendra Modi, gave its approval for launching Gold Monetization Schemes (GMS) which was announced in the Union Budget.

Gold Monetization Schemes is a new gold scheme which has modified the Gold Deposit Scheme (GDS) and the Gold Metal Loan Scheme (GML) with a purpose to mobilise idle gold possessed by people in the country for supplementing RBI’s gold reserve.

Objective of Gold Monetization Schemes

The objective of introducing the modifications in the schemes is mainly to mobilized gold also to supplement RBI’s gold reserves and will help in reducing the government’s borrowing cost.

Features of Gold Deposit Scheme

The changed Gold Deposit Scheme (GDS) as well as the Gold Metal Loan (GML) Scheme consists of amends in the scheme guidelines only. The risk of gold price changes will be borne by the Gold Reserve Fund that is being created.

  • The benefit to the Government is in terms of reduction in the cost of borrowing, which will be transferred to the Gold Reserve Fund.
  • This scheme also intends to mobilize the gold that is lying around the house, trusts and even institutions in the country, hence providing a fillip to the ornament industry.
  • This effort is also intended to reduce the amount of gold imported from abroad depsite the demands being high.

Revamped Gold Deposit Scheme

  • The ones which will meet the criteria as specified by Bureau of Indian Standards (BIS) among the 331 Assaying and Hallmarking Centres spread across various parts of the country will be permitted to act as Collection and Purity Testing 1 Centres for checking the purity of gold for the purpose of this scheme.
  • The minimum quantity of gold that a consumer can bring has been proposed to be set at 30 grains.
  • Gold can be in any form including jewelry and bullion.
  • The number of these centres is expected to increase with time.

Gold Savings Account

A Gold Savings Account may be opened by consumers any time, along with KYC norms, if required. This account would be denominated in grams of gold.

Transfer of Gold to Refiners

  • Collection and purity testing centres will first send the gold to the refiners.
  • The refiners will keep the gold in their warehouses (With the exception if the banks prefer to hold it themselves).
  • The refiners will be paid a fee for their services which will be mutually discussed between the bank and the refiner. In this case the consumer will not be charged anything.
  • The banks will then have to enter into a tripartite Legal Agreement with refiners as well as the Collection and Purity Testing Centres that are selected by them to be their partners for the scheme.


The deposits under this scheme can be attained for a short-term period of 1 to 3 years (with a roll out in multiples of one year); a medium-term period that will last between 5 to 7 years and a long-term period that may last between 12 to 15 years. Similar to a fixed deposit, breaking of lock-in period will be permitted in either of the options but a penalty will be charged in the case of a premature redemption which also includes partial withdrawal.

Interest Rate on Gold Monetization

In the case of short-term period the interest rate may be fixed by the banks but based on the prevailing international lease rates, costs, even market conditions etc. with denomination in grams of gold. For the medium and long-term deposits, the rate of interest (and fees to be paid to the bank for their services) will be issued by the government, with consultation with the RBI from over time. The interest rate for the medium and long-term deposits will be denominated and payable in rupees, on the basis of the deposited gold.


Short term deposits: The customer will has the option of redemption, for the principal deposit and interest earned, either in cash (in equivalent rupees of the weight of deposited gold at the prices prevailing at the time of redemption) or in gold (of the same weight of gold as deposited), which will have to be exercised at the time of making the deposit. The change in the option, is allowed at the bank’s discretion.


The deposited gold will be utilized in the following ways:-

For medium and long-term deposit:

  • Auctioning.
  • Replenishment of RBIs Gold Reserves.
  • Coins.
  • Lending to jewellers.

For short-term deposit

  • Coins.
  • Lending gold to jewellers.
  • Tax exemptions, same as those available under GDS would be made available to customers, in the revamped GDS, as applicable.
  • The difference between the current borrowing cost for the Government and the interest rate paid by the Government under the medium/long term deposit will be credited to the Gold Reserve Fund.

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