Gold Monetisation Scheme: Earn Money on your Idle Gold

Created on 14 Dec 2019

Wraps up in 5 Min

Read by 7.4k people

Updated on 31 Dec 2023

Monetizing Gold with Banks

Gold is one of the most valuable elements found on our blue planet. Throughout history, we've admired gold and used it as a medium of exchange. Furthermore, gold is treated as a commodity in the market and has an inverse relationship with a country's local currency. This means that if a country is importing a large amount of gold, it would suggest that the value of its currency must be going down.

But, owning gold is a hectic task because it requires a lot of security. This is the reason that people who purchase gold are on the lookout for a place to store it. However, if you go to a bank to safely keep your gold, they’ll charge an amount for the security they provide, along with maintenance charges.

So, a question pops up in our mind- “Is there a way to avoid these charges?” Well, it turns out there is. Enter - GMS.

What is the Gold Monetisation Scheme?

The Gold Monetisation Scheme was introduced back in 2015 by the Government of India. Aimed at turning idle gold into a valuable asset, the scheme was initially introduced as a replacement for the former GDS (Gold Deposit Scheme) and GML (Gold Metal Loan) scheme. However, it was later clarified by RBI that the Gold Monetisation Scheme would be an improved version of both the Gold Deposit Scheme and Gold Metal Loan.

The scheme is greatly helpful for reducing India's dependence on gold imports, along with helping banks and NBFCs to monetise the idle gold of our country, which weighs over 20 thousand tonnes.

“But what’s in it for me?”- you may ask. 🤔

Well, with GMS, you can forget about the hustle you need to do to get bank lockers. You can easily deposit your gold under this scheme. Furthermore, you'll be paid interest in depositing your gold. The interest amount will proportionally increase with the price of gold in the market.

Also, it should be noted that banks will not store your gold in the same form you’d given them. Meaning, they'll convert them into gold coins and send them to the Metals and Minerals Trading Corporation of India (MMTC), or sell them to other banks or jewellers. So, maybe you could think a little before depositing any gold items that are emotionally valuable to you.

Features of the Gold Monetisation Scheme

The following are some features of GMS to consider before depositing your gold:

  • The scheme is applicable only for depositing raw gold like gold coins and gold bars.

  • A minimum of 30 grams of gold is necessary to apply for this scheme, and there’s no maximum limit for investment.

  • Short-term, Medium and Long-term deposits are possible with this scheme, each with a tenure of 1-3 years, 5-12 years and 12-15 years, respectively.

  • Premature withdrawal is allowed, but it would result in a penalty.

  • Gold Deposit rate of up to 2.50%/year will be provided to the depositor under this scheme. However, the Gold Deposit rate for various tenures may vary from bank to bank. Thus, it is advisable to consult your bank about the Gold Deposit rate before investing under this scheme.

  • The capital gains under this scheme will be exempted from income tax, wealth tax, and capital gain tax.

Why was GMS Introduced?

Previously, GMS had a predecessor named GDS. The Gold Deposit Scheme (GDS) was introduced on September 14th, 1999. The scheme had similar motives as the GMS scheme but the Gold Deposit Scheme suffered from some drawbacks. Let's find out what they were:

  • The Gold Deposit Scheme was highly inconvenient to implement for several banks back in 1999. Hence, only a few banks were providing this scheme.

  • Under the Gold Deposit Scheme, the minimum tenure limit was 3-7 years. This created problems for people who wanted to withdraw their gold earlier at their convenience.

  • The Gold Deposit Scheme of 1999 restricted mutual funds from investing.

The GDS saw several modifications when it was relaunched in 2013, but the scheme still required some updates. And so the Gold Monetisation Scheme was introduced in 2015.

Advantages of Gold Monetisation Scheme

By investing in the Gold Monetisation Scheme, you can:

  • Earn interest: Unlike physical gold, GMS lets you earn interest on its value, providing a passive income stream.

  • Withdrawal: At the end of your account's tenure, you can make withdrawals in the form of money or physical gold. Here, physical gold indicates gold in the form of gold coins or bars with 99.5% purity.
    As discussed above, keep in mind that you won't get your actual gold back in the same way as you'd deposited it.

  • Save on locker fees: Avoid hefty bank locker charges by depositing your gold under GMS.

  • Reduce risk of theft: Keep your gold safe and secure in bank vaults.

  • Boost economy: By mobilising gold, GMS helps reduce dependence on imports and promotes investments.

  • Low Dependence: The Gold Monetisation Scheme was introduced with the significant purpose of eliminating our country's dependence on gold imports.

How to Apply for the Gold Monetisation Scheme?

To apply for the Gold Monetisation Scheme, you can contact your bank. They’ll provide you with a gold savings account, which will be used for storing physical gold like jewellery.

Here are the eligibility criteria to apply for GMS:

  • Individuals, Hindu Undivided Families (HUFs), and institutions can participate.
  • The minimum deposit is 10 grams of gold in bars, coins, or jewellery (excluding stones/other metals).
  • Gold purity should be at least 995 fineness.
  • Deposit gold at designated Collection and Purity Testing Centres (CPTCs) certified by the Bureau of Indian Standards (BIS).

Following are some of the prerequisites that you require to have this account:

Know Your Customer (KYC)

You'll be asked for your KYC details by the bank. For this, you can provide any proof of identification as suggested by your bank.

Certificate of Purity

A Collection and Purity Testing Center (CPTC) will assign you this certificate. They’ll perform some X-ray diffraction tests on your gold to test its purity, along with measuring its weight. Once this is done, they'll provide an official receipt stating both the quantity and quality of the gold you own.

Your bank will provide you with a final deposit certificate after you submit your CPTC receipt to them. The final deposit certificate will contain all the information related to your gold deposit. There are over 330 CPTCs approved across the country from which you can choose.

The Bottom Line

Overall this is a great scheme which can help in strengthening our country’s economy.

We Indians are known for our love of gold. A wedding, or some festival or even a party, any joyous occasion here, is all said to be incomplete without the inclusion of gold or gold coins. In fact, gold is the essence of all our holy and happy occasions.

However, in the aftermath of these occasions, the same gold is often secluded from our daily lives. We rarely touch it, and it is kept idle in lockers without any purpose, simply losing us money.

So, don’t you think it’s better to make use of that gold to earn more wealth rather than just housing it.

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Rishika Mukherjee

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Mukherjee is an avid reader and loves to write as much as read. She is the youngest of all but handles chores like a 50-year-old woman. She takes a lot on her plate and somehow, eerily manages to get the job done. As Hazel Grace stated, she could read a good author's grocery list, and so would Miss Mukherjee. 

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