The Gold Monetisation Scheme Explained

The Gold Monetisation Scheme (GMS) is a Government of India scheme, launched on 5 November 2015, that allows households, trusts and institutions to deposit idle gold with banks and earn interest on it, with the aim of mobilising the country’s vast private gold stock and reducing the need to import gold. Under the scheme, deposited gold is tested, melted and made available to jewellers and the market, so that existing domestic gold is recycled rather than replaced by fresh imports.

The scheme replaced two earlier schemes, the Gold Deposit Scheme of 1999 and the Gold Metal Loan Scheme, and was launched together with the Sovereign Gold Bond Scheme and the Indian Gold Coin. It is regulated by the Reserve Bank of India (RBI) and administered by the Department of Economic Affairs in the Ministry of Finance, and its uptake has stayed modest compared with the size of household gold holdings.

Key Takeaways

• The Gold Monetisation Scheme was launched in India on 5 November 2015 to bring household and institutional gold into the formal financial system and to reduce gold imports.
• Under the Gold Monetisation Scheme, depositors can place a minimum of 10 grams of raw gold with a designated bank and earn interest on the deposit, with no upper limit on the quantity.
• The scheme originally offered three deposit tiers: a short-term bank deposit of 1 to 3 years, a medium-term government deposit of 5 to 7 years and a long-term government deposit of 12 to 15 years.
• Gold deposited under the Gold Monetisation Scheme is assayed at Bureau of Indian Standards-accredited Collection and Purity Testing Centres (CPTCs) and then melted and sold or lent to jewellers and other users.
• In March 2025, the Government of India discontinued fresh deposits under the medium- and long-term components of the scheme, leaving the short-term bank deposit as the continuing tier.
• Uptake of the Gold Monetisation Scheme has been modest because households value jewellery for cultural and emotional reasons, interest rates are low, and the process of testing and melting is seen as inconvenient.

What is the Gold Monetisation Scheme?

The Gold Monetisation Scheme is a government-backed scheme under which individuals and institutions deposit physical gold with banks and receive interest in return, so that gold lying unused in homes and temples becomes a productive financial asset. The core idea is to treat privately held gold as a national resource that can be recycled into the domestic market.

India is one of the world’s largest consumers of gold, and has very little domestic mining. Almost all of the metal used for jewellery, investment and gifts is imported, which puts pressure on the current account deficit and the rupee. At the same time, Indian households have accumulated large stocks of gold over generations, commonly estimated in the range of tens of thousands of tonnes. The Gold Monetisation Scheme was designed to mobilise a fraction of this stock.

The scheme is the successor to the Gold Deposit Scheme introduced in 1999, which had limited success because of its narrow design, restrictions on who could participate and a lack of interest in the market. The 2015 version expanded the types of depositors, offered government-backed deposits and set up a purity testing network.

Why did India launch the Gold Monetisation Scheme?

India launched the Gold Monetisation Scheme to reduce gold imports, bring idle household gold into the financial system and support the balance of payments. Gold has been among the country’s largest import items by value, often ranking close to crude oil in some years, and rising imports widen the current account deficit.

The scheme has three main aims.

• Reduce import dependence: Deposited gold can be sold to jewellers, who would otherwise import the metal.
• Mobilise idle assets: Gold kept in lockers and homes earns nothing, while deposited gold earns interest.
• Develop a gold market: The scheme encourages the formal gold ecosystem of refiners, assayers and hallmarking centres, and moves the country toward a gold-backed financial product market.

The scheme was announced in the Union Budget of 2015 and notified later that year, alongside efforts to make gold investment less dependent on physical purchases.

How does the Gold Monetisation Scheme work?

The Gold Monetisation Scheme works through a chain in which a depositor takes gold to a designated centre, the gold is tested and melted, the depositor receives a deposit certificate, and the bank then puts the gold to use. Each step is meant to give the depositor a clear record of the quantity and purity of the gold.

Step-by-step process

• The depositor visits a Collection and Purity Testing Centre (CPTC) that is linked to a participating bank and completes the KYC (Know Your Customer) formalities.
• The CPTC assays the gold in the presence of the depositor, using techniques such as the fire assay or X-ray fluorescence, and records the purity and weight.
• The depositor can accept or reject the assessed value; if accepted, the gold is melted into bars and a deposit receipt is issued.
• The bank opens a Gold Deposit Account in the depositor’s name, with the quantity credited in grams of 995 fineness gold.
• Interest accrues on the gold deposited, and on maturity the depositor receives the proceeds in rupees or in gold, depending on the tier and the option chosen.

The gold deposited is expressed in grams, and the interest is calculated on the gold weight, which means the depositor retains the benefit of gold price movements. The value of the deposit at redemption depends on the prevailing price of gold.

What are the deposit tiers under the scheme?

The Gold Monetisation Scheme has three deposit tiers, differing in tenure, who bears the liability and how the interest is determined. These tiers were designed so that depositors could choose between short-term flexibility and long-term returns.

For the short-term tier, the bank used the gold for its own purposes, such as lending it to jewellers on gold metal loans. For the medium- and long-term tiers, the gold was auctioned by designated agencies such as the Metals and Minerals Trading Corporation (MMTC), and the Government of India took on the liability to return the value to the depositor.

In March 2025, the government announced the discontinuation of the medium- and long-term government deposit components, which meant that new deposits under those tiers were no longer accepted. The short-term bank deposit continues under the scheme, subject to the participating banks. Depositors who already hold medium- and long-term deposits can generally continue to the end of their term.

What are Collection and Purity Testing Centres (CPTCs)?

Collection and Purity Testing Centres (CPTCs) are certified facilities that collect gold from depositors, test its purity and weight, and melt it into standard bars as the first step of the Gold Monetisation Scheme. These centres are accredited by the Bureau of Indian Standards (BIS) and must follow its guidelines for testing and hallmarking.

CPTCs are the backbone of the scheme because depositors would not trust a deposit scheme without an independent, transparent assessment of their gold. The centres test the gold in front of the customer and provide the assay report. Large jewellery chains, refiners and hallmarking centres have been among the entities that have set up or applied for CPTC status.

The melted gold is taken to refiners that convert it into standard bars. Refiners include well-known entities such as the MMTC-PAMP, which runs one of the country’s accredited refineries. The refined gold is then sold to jewellers and other buyers, which provides a domestic supply source in place of imports.

How is deposited gold recycled?

Deposited gold is recycled by being melted into standard bars, refined to the required purity and then sold or lent to jewellers, manufacturers and other users, so that it re-enters the domestic supply chain. This recycling is the way in which the Gold Monetisation Scheme can reduce the need to import fresh gold.

In the short-term tier, banks can lend the gold to jewellers through gold metal loans, which allow jewellers to obtain raw material without importing it. In the government tiers, the gold is auctioned by authorised agencies, and the proceeds fund the interest and return payments to depositors.

The deposited gold can also be used by the government to meet some of its own needs, and some portion can be sold to other banks and entities. In all cases, the arrangement depends on a stable market for the gold and the ability of banks and the government to manage price risk.

What are the benefits for depositors?

The benefits for depositors under the Gold Monetisation Scheme include interest on idle gold, safe custody, potential benefit from gold price changes and tax relief on the interest and capital gains. A depositor who keeps gold at home earns nothing and bears the risk of theft, while a depositor under the scheme earns a return.

• Interest on gold: Interest is paid on the gold deposited, normally at a modest rate.
• Safe custody: The gold is held by the bank or the government agency instead of at home.
• Price participation: Redemption is based on the gold weight, so the depositor benefits from any rise in gold prices.
• Tax relief: At the time of launch, the interest earned and the capital gains on the deposit were exempted from income tax, capital gains tax and wealth tax, though depositors should check the latest tax treatment.
• Flexible redemption: Depending on the tier, the depositor can receive rupees or physical gold on maturity.
• Loss of making charges avoided: Jewellery can be deposited without needing to sell it separately, though the making charges embedded in jewellery are generally not compensated.

How does the Gold Monetisation Scheme relate to the Sovereign Gold Bond and Indian Gold Coin?

The Gold Monetisation Scheme is part of a three-part package launched on 5 November 2015, together with the Sovereign Gold Bond Scheme and the Indian Gold Coin, which together aim to shift savings from physical gold to financial or recycled forms. Each product addresses a different part of the problem.

The Sovereign Gold Bond is denominated in grams of gold, and the redemption value is linked to the market price of gold, with interest paid in addition. Fresh issuance of the bonds has been paused in recent years because the government considered the cost of the scheme to be high, but earlier tranches remain in force until maturity.

The Indian Gold Coin was launched as the first national gold coin, carrying the national emblem, and was intended to cut into the demand for imported gold coins and bars. Together, these products show a policy shift from physical imports to a more diversified approach.

Why has uptake of the scheme been modest?

Uptake of the Gold Monetisation Scheme has been modest because Indian households view gold as a cultural and emotional asset, the financial returns are low and the process involves melting of jewellery. The quantity mobilised has been a small fraction of the household stock, running into only tens of tonnes compared with the tens of thousands of tonnes believed to be held privately.

• Cultural attachment: Gold jewellery is often inherited, worn at weddings and festivals, and associated with family identity, so households are reluctant to see it melted.
• Low interest rates: The interest offered is small compared with the potential of gold price appreciation and with other savings options.
• Melting requirement: Depositors lose the design value and making charges of jewellery, since the item is melted.
• Distrust and awareness: Many households distrust formal channels or are unaware of the scheme, and prefer informal or traditional storage.
• Limited access: The number of CPTCs and participating banks has been relatively small, particularly in rural areas.
• Documentation: KYC and the use of formal channels can discourage depositors who hold gold outside the tax net.
• Liquidity concerns: Lock-in periods and premature withdrawal penalties reduce flexibility.

The withdrawal of the medium- and long-term tiers in 2025 is widely read as an acknowledgement that those components attracted little participation relative to their cost and complexity.

How has the scheme been revised since 2015?

The Gold Monetisation Scheme has been revised since 2015 through changes to the guidelines that widened the pool of eligible depositors, simplified the processes and altered the tiers. The Department of Economic Affairs and the RBI issued revised guidelines in 2019 and 2021, among others, to make the scheme easier to use.

The revisions allowed more kinds of entities, such as mutual funds and exchange-traded funds, to take part, strengthened the role of refiners and jewellers as participants in the scheme, and rationalised the rules on minimum quantities and interest. The overall direction was to improve the commercial case for banks to participate and to encourage a wider network of testing centres.

Despite these changes, the scheme has not become a mainstream product. Its policy lesson is that a successful gold deposit programme probably requires strong financial incentives, convenience and trust, in addition to government backing.

What is the future of gold monetisation in India?

The future of gold monetisation in India probably depends on making deposit schemes more convenient and rewarding, and on the growth of alternatives such as gold exchange-traded funds and digital gold that reduce the demand for physical imports. Policymakers continue to seek ways to channel household gold into the formal economy.

Developments such as mandatory hallmarking of gold jewellery with a Hallmark Unique Identification (HUID) number, the growth of gold exchange-traded funds and the development of a gold exchange regulated by the Securities and Exchange Board of India (SEBI) may improve transparency and trust in gold. Over time, such steps could make the gold market more formal and support a future version of monetisation.

Bottom Line

The Gold Monetisation Scheme, launched on 5 November 2015, was designed to turn India’s large private gold stock into a productive resource and to reduce imports. While the scheme created an important framework of purity testing, deposit accounts and recycling, its limited uptake and the 2025 discontinuation of its medium- and long-term tiers show how difficult it is to change deeply rooted gold habits.

Frequently Asked Questions

What is the Gold Monetisation Scheme in India?

The Gold Monetisation Scheme is a government scheme launched on 5 November 2015 that lets people deposit idle gold with banks and earn interest. The deposited gold is tested, melted and sold or lent to jewellers, which reduces the need for imports. The scheme is regulated by the Reserve Bank of India and administered by the Department of Economic Affairs.

What is the minimum gold that can be deposited under the scheme?

The minimum deposit under the Gold Monetisation Scheme is 10 grams of raw gold, which can be in the form of bars, coins or jewellery excluding stones and other metals. There is no maximum limit on the quantity that a depositor can place. The gold is assessed for purity at a Collection and Purity Testing Centre before it is accepted.

What are the deposit tenures under the Gold Monetisation Scheme?

The scheme originally had three tenures: short-term deposits of 1 to 3 years, medium-term deposits of 5 to 7 years and long-term deposits of 12 to 15 years. In March 2025, the government discontinued fresh medium- and long-term deposits, so the short-term bank deposit is the continuing option. Existing deposits generally run until their maturity.

What is a Collection and Purity Testing Centre?

A Collection and Purity Testing Centre (CPTC) is a facility accredited by the Bureau of Indian Standards that collects gold from depositors, assays its purity and weight, and melts it into bars. CPTCs are the first step in the Gold Monetisation Scheme and provide the assay report on which the deposit value is based. They are linked to participating banks.

How is the Gold Monetisation Scheme different from the Sovereign Gold Bond?

The Gold Monetisation Scheme is for people who already own physical gold and want to earn interest on it, whereas the Sovereign Gold Bond is a paper investment for people who want exposure to gold prices without holding the metal. The bond is issued by the Reserve Bank of India on behalf of the government with an eight-year term. Both were launched together in November 2015.

Why has the Gold Monetisation Scheme not been very successful?

The scheme has not been very successful mainly because Indian households are emotionally and culturally attached to gold and are reluctant to have jewellery melted. Interest rates are low, making charges are lost and the network of testing centres has been limited. Awareness, trust and convenience issues have also kept deposits small compared with the size of household gold holdings.

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