Gold Monetisation Scheme And Its Benefit

Nitin Agarwal
May 07, 2020   •  4 views

The Gold Monetisation Scheme is relatively new – it was introduced by the Central Government only in 2015-16. The objective is to simultaneously safeguard the gold held in Indian households as well as put it to productive use. The larger objective is to cut down the country's gold imports by decreasing domestic demand.

Gold monetisation scheme(GMS) is like a gold savings account. You would generally keep your gold without any security at home or store it in bank lockers by paying a maintenance fee. But instead of that, you could keep your gold in any form in a Gold Monetisation Scheme account and earn interest as the price of the precious metal goes up.


Resident Indians (Individuals, HUF, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies) can make deposits under the scheme. The opening of gold deposit accounts will be subject to the same rules with regard to customer identification as are applicable to any other deposit account.

Benefits of opening a gold deposit account with Bank

  1. You earn interest for your gold coins bought in the past from banks / jewellers lying in your locker.

  2. Gold lying in your locker appreciates in value if gold price goes up but does not pay you interest. Instead you pay bank locker charges on the same. Now, coins and bars can earn interest apart from the appreciation of value.

  3. Your gold will be securely maintained by the bank.

  4. Earnings are exempt from capital gains tax, wealth tax and income tax. There will be no capital gains tax on the appreciation in the value of gold deposited, or on the interest you make from it.

  5. Bank has tied-up with renowned Refiners who will help you check your gold’s purity and assess the gold in front of you.


    Gold Monetisation Scheme aims to mobilize inactive purchasing power stored in the form of gold with the public. Under the scheme, individuals can submit gold to a Purity Testing Centre and then to a collection centre; both assigned by the government.

    From the collection centre, he will get a certificate indicating the value of the gold. When the individual gives this gold certificate to a bank, he can open an deposit account with that bank  equal to the value of the gold he sold.

    Bank in return will pay interest to the individual for the deposits. 

    The minimum quantity of gold that a customer can bring is proposed to be set at 30 grams.

    Submitting gold, purity testing centre, collection centres and refiners

    Gold deposit scheme starts with the individual giving his gold to the Purity Testing Centre. This testing centre is designated by the government. After the testing and measuring the quantity of the gold, it will be sent to a gold collection centre with the consent of the individual. The Collection centre gives a certificate to the individual certifying the value of the gold.

    From the collection centre gold will be transferred to a refiner. The refinery refines gold, converts into standard bars and keeps it.

    Now the individual submits the certificate to a bank and thus opens a gold deposit account with the bank. As a follow up, the bank takes control of the individual’s gold holdings with the refiner and starts its monetization process.

    How bank monetizes the gold?

    After getting the certificate and giving deposit account to the individual, bank can take custody of the gold kept by the individual with the refiner. It can use several options to monetize gold or to convert it into money. An important one is to sell the gold to a jeweler. Interested jewelers can approach the bank for availing a ‘gold loan’.

    When the bank sanctions the gold loan to the jeweler, it will be provided from the gold kept with the refiner. So the depositor’s gold holding with the refiner will be sold physically to the jeweler.

    The refiner should do the physical delivery of the gold to the jeweler. Gold loan here includes the physical delivery of the gold.

    The Jeweler’s gold purchase will be treated as a loan availed from the bank equivalent to the value of the gold he got physically. For this, the Jeweler has to start a ‘gold loan account’ with the bank.

    He pays an interest to the bank like in the case of an ordinary loan.

    From the interest paid by the jeweler, the bank can give interest to the individual who has the gold deposit account. Understandably, the interest given to the gold depositor will be lower than the interest paid by the gold loan taker (Jeweler).

    According to the present gold deposit scheme, the interest rate charged by the banks from the jeweler should cover the following:

    • Interest rate given to the depositor of gold

    • Fee given to the refiners and Purity Verification Centres

    • A minimum profit margin for the banks

    The bank can use the gold for other types of activities like buying of foreign currencies and keeping the gold as part of CRR/SLR requirements.

    For the successful implementation , the gold deposit scheme requires coordination between the different agencies involved. The Gold Deposit Scheme hence makes a mandatory MoU between Banks, Purity Testing centres and the Refiners regarding the execution of the programme.

    Government has elaborated the various objectives of the gold monetization programme. Following are those objectives:

    • To mobilize the gold held by households and institutions.

    • To facilitate the gems and jewellery sector by making gold available as raw material on loan from the banks.

    • To reduce the reliance on gold import

      For Further details of the scheme , it is recommanded to contact your banker.