Gold Monetization Scheme (GMS)
Background and Purpose
- India is one of the largest consumers of gold, but a huge part of this gold lies idle in households and temples, without contributing to the economy.
- To address this, the government introduced the Gold Monetization Scheme (GMS) in 2015 (revamping the earlier Gold Deposit Scheme and Gold Metal Loan Scheme).
- Purpose: To mobilize idle gold and put it to productive use.
- By doing so, it reduces India’s dependence on gold imports and boosts the gems and jewelry sector, which contributes 7% to GDP and about 10–12% of merchandise exports.
Eligibility
- Resident Indians can participate (Individuals, HUFs, Proprietorship & Partnership firms, trusts, etc.).
- Joint deposits are also allowed.
Taxation Benefits
- Earnings under GMS are exempt from capital gains tax, wealth tax, and income tax.
Deposit Quantity
- Minimum: 10 grams of raw gold (bars, coins, jewelry excluding stones and other metals).
- Maximum: No upper limit.
Objectives
- Mobilize gold held by households and institutions.
- Reduce the country’s reliance on gold imports.
- Give a boost to the gems and jewelry industry.
Tenure and Types of Deposits
The scheme has three types of deposits, each with a different lock-in period and return:
| Type of Deposit | Tenure | Lock-in Period | ROI (Rate of Interest) | Who Accepts Deposit? | Denomination (Principal & Interest) |
| Short Term Bank Deposit (STBD) | 1–3 years | 1 year | As decided by bank | Bank’s own balance sheet | Principal: Gold or Cash; Interest: Gold |
| Medium Term Government Deposit (MTGD) | 5–7 years | 3 years | 2.25% per annum | Banks on behalf of Government | Principal: Cash; Interest: Cash |
| Long Term Government Deposit (LTGD) | 12–15 years | 5 years | 2.50% per annum | Banks on behalf of Government | Principal: Cash; Interest: Cash |
Significance
- Provides an avenue for individuals to earn interest on idle gold, which otherwise lies unproductive in lockers.
- Helps the government reduce gold imports, improving the current account balance.
- Supports the gems and jewelry sector, a major contributor to exports and employment.
✅ In summary:
The Gold Monetization Scheme (GMS) is a win–win arrangement. Households and institutions benefit by earning interest and tax exemptions on their idle gold, while the nation benefits by reducing gold imports and strengthening the jewelry sector. With options ranging from short-term to long-term deposits, the scheme creates a structured mechanism to channelize India’s vast reserves of privately held gold into productive economic use.