Gold holds a unique value in Indian culture and households. Yet much of this gold remains idle, stored away without generating any income. The Gold Monetisation Scheme (GMS) by the Government of India offers a practical way to convert this idle gold into a productive asset. Through GMS, you can earn attractive interest on your gold while retaining ownership. Here’s a detailed guide explaining how the scheme works, the current Gold Monetization Scheme interest rate, and how it compares with the Gold Loan Interest Rate.
What is the Gold Monetisation Scheme?
Launched in 2015, the Gold Monetisation Scheme aims to mobilise idle household and institutional gold and bring it into the formal economy. Its objective is to reduce India’s gold import dependence and improve the Current Account Deficit by efficiently utilising existing gold assets.
Under the scheme, individuals, Hindu Undivided Families (HUFs), private entities, trusts, and government bodies can deposit their gold jewellery, coins, or bars with banks or designated agencies. This gold is usually melted into bars with a standard fineness of 995 and used as working capital by jewellers or banks. In return, depositors earn interest paid in Indian Rupees based on the deposited gold’s value.
Types of Gold Deposits and Updates
Originally, GMS offered three types of deposits:
- Short-Term Gold Deposit (STGD): Tenure 1 to 3 years
- Medium-Term Gold Deposit (MTGD): Tenure 5 to 7 years
- Long-Term Gold Deposit (LTGD): Tenure 12 to 15 years
Each type had a lock-in period and offered interest rates fixed by the government or banks.
However, effective 26 March 2025, the government discontinued the Medium-Term and Long-Term deposits. Presently, only the Short-Term Gold Deposit scheme is operational nationwide. Banks now set the Gold Monetization Scheme interest rate for this category, usually ranging from 0.55% to 1% per annum, depending on the bank and deposit tenure.
Understanding the Gold Monetisation Scheme Interest Rate
Interest under GMS is calculated on the bank-recognised gold price at the time of deposit and paid periodically or at maturity in Indian Rupees. For earlier medium and long-term deposits, interest rates were 2.25% and 2.5% respectively, but these options are closed now.
In the current setup, the Short-Term deposit rates vary, and depositors should compare rates offered by different banks before investing. Interest earned is taxable as per income tax laws, but principal and capital gains from gold price appreciation when redeemed in gold remain tax-exempt.
Comparing Gold Monetisation Scheme Interest Rate and Gold Loan Interest Rate
While GMS helps you earn interest on your gold holdings, Gold Loans allow you to borrow funds by pledging gold as collateral. Gold loans typically carry interest rates between 7% and 10% annually in India.
The key difference is that with GMS, you earn an income (interest) from your gold without selling or borrowing against it. With gold loans, you get liquidity by borrowing, but at a cost of interest. Additionally, GMS holders benefit from appreciation in gold’s market value over time, which is retained along with the principal amount.
How to Maximise Returns under the Gold Monetisation Scheme?
Here are some strategies to get the most from GMS:
- Select Short-Term deposits matching your liquidity needs, balancing tenure and interest.
- Compare Gold Monetization Scheme interest rate offerings across banks every year.
- Avoid premature withdrawals as some penalties and lower interest rates apply if allowed.
- Track market gold prices to understand the potential appreciation of your principal.
- Combine GMS with other gold investments, such as Sovereign Gold Bonds, to diversify.
Participation Process in Gold Monetisation Scheme
Joining GMS is straightforward:
- Visit a designated bank branch or Collection and Purity Testing Centre (CPTC).
- Deposit a minimum of 10 grams of gold in any form (jewellery excluding stones, coins, or bars).
- The deposited gold is tested for purity and converted to 995 fineness bars.
- Depositors receive deposit receipts and periodic interest payments on the Indian Rupee value of their gold deposits.
- Premature redemption may be allowed under specific conditions, with applicable terms varying by bank.
Where to Avail Gold Monetisation Services?
Most leading public and private sector banks in India participate in GMS. Additionally, financial marketplace platforms like Bajaj Markets offer access to GMS and related financial services. These platforms provide a convenient way to explore gold deposit options and manage investments.
Conclusion
The Gold Monetisation Scheme offers Indian gold holders a secure and government-backed avenue to earn a steady return on their idle gold. Though Medium and Long-Term deposits have been discontinued since March 2025, the Short-Term deposit scheme continues, with banks offering variable interest rates. Compared to the higher Gold Loan Interest Rate, GMS allows investors to earn without incurring debt or selling gold, while also benefiting from gold price appreciation.
By understanding the Gold Monetization Scheme interest rate, recent regulatory changes, and practical participation steps, Indian investors can make informed decisions to maximise returns from their gold.
