The government has decided to discontinue the Gold Monetisation Scheme (GMS), effective from today, March 26.
The Ministry of Finance announced the closure, marking the second gold-related scheme to be discontinued.
Earlier, the Sovereign Gold Bond (SGB) scheme was also phased out, although no official announcement was made.
However, since February 2024, no new SGB installments have been issued, leading to the assumption that the government intends to end this scheme as well.
What is the Gold Monetisation Scheme?
The Gold Monetisation Scheme (GMS) was launched on September 15, 2015. It allowed people to deposit idle gold they had at home.
The primary goal of the scheme was to reduce gold imports. India’s annual gold consumption is around 800 tonnes, while the country only produces 1 tonne annually, making gold imports necessary.
What Are the Benefits of Depositing Gold in the GMS?
When people deposited their gold under this scheme, the government issued gold bonds in return.
These bonds came in denominations of 5, 10, 50, and 100 grams and had a maturity period of 5-7 years.
The interest rate on these bonds was based on the market price of gold at the time of the deposit.
The government hoped that the interest on these bonds would encourage more people to deposit their unused gold.
Can You Still Deposit Gold in the Scheme?
Although the government has closed most options under this scheme, you can still deposit gold through the short-term bank deposit (STBD) option.
This option lasts 1-3 years. The government has discontinued the medium-term (5-7 years) and long-term (12-15 years) government deposit options.
However, the short-term option will continue, but its availability depends on individual banks. Banks can choose whether or not to continue offering this option.
The reason behind this decision is that the interest rates for short-term bank deposits are set by the banks, while the government determines the rates for medium- and long-term deposits.
The government’s interest rate for medium-term bonds was 2.25%, and for long-term bonds, it was 2.5%.
What Happens if You Have Already Deposited Gold?
If you have already deposited gold in the GMS, there’s no need to worry. The government will return the money for the bonds upon maturity. Depositors who wish to get back their physical gold can do so as well.
If your bond has matured, you can redeem it. If your bond is yet to mature, you will still receive the money once it matures.
If you wish to redeem your bond before its maturity, you can, but you may have to pay a penalty according to the existing rules.
