Gold Monetization Scheme

Gold Monetization Scheme was launched by Government of India in 2015 and managed by Reserve Bank of India. The scheme is known by the name Gold Monetisation Scheme, 2015.

How it works: Under this Gold Monetization Scheme a customer who possesses Gold can deposit their gold in any form in a GMS account to earn interest as the price of the gold metal goes up.

Purpose: The main purpose of this scheme is to reduce the import of Gold by India. This will happen because the household gold will be mobilized as per this scheme and there will be more gold in the market.

The Gold Monetization Scheme has modified the existing ‘Gold Deposit Scheme’ (GDS) and ‘Gold Metal Loan Scheme (GML).

Basic Information about the Scheme

Who can deposit Gold: Only Resident Indians can open such accounts with the bank where they can deposit the gold. The subcategory includes- Individuals, HUFs, Proprietorship & Partnership firms, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations, Companies, charitable institutions, Central Government, State Government or any other entity owned by Central Government or State Government.

Joint deposits of two or more eligible depositors are also allowed under the scheme.

Where can one deposit the Gold under GMS: The customer can deposit gold at Collection and Purity Testing Centre (CPTC) or any bank branch designated for this business. However, this gold must be first examined at CPTC.

Banks may identify at least one branch in a State/Union Territory where they have presence to accept the deposits under the Scheme.

What is CPTC- Collection and Purity Testing Centre (CPTC) – The collection and assaying centres certified by the Bureau of Indian Standards (BIS) and notified by the Central Government for the purpose of handling gold deposited and redeemed under GMS.

What kind of Gold can be deposited: raw gold (bars, coins, jewelry excluding stones and other metals) with the amount of 995 fineness gold.

Minimum Quantity of Gold: The minimum deposit at any one time shall be 30 grams

Maximum Quantity of Gold: No Maximum Limit

Interest Rate and Type of Gold Deposit Scheme

There are two types of Gold Deposit Scheme under the Gold Monetization Scheme:

First: Short Term Bank Deposit (STBD)

Second: Medium and Long Term Government Deposit (MLTGD)

Short Term Bank Deposit (STBD)

Time Period of Deposit– 1 to 3 years

Interest Rate: Decided by the bank. The interest can be paid in (i) Indian Rupee equivalent of the deposited gold or (ii) denominated in grams of gold.

Medium and Long Term Government Deposit (MLTGD)

Time Period of Deposit for Medium Term: 5-7 years (Minimum Lock IN period- 3 years)

Time Period of Deposit for Long Term: 12-15 years (Minimum Lock IN period- 5 years)

Rate of Interest on medium-term deposit – 2.25% p.a.

Rate of Interest on long term deposit – 2.50% p.a.

What happens to the jewelry gold after you deposit it with the bank

If you deposit jewels, that will be converted and transformed into equivalent coins or bars and used by the bank. When you withdraw, you will get the equivalent money or the equivalent amount of gold coins or bars.

Nominated bank: A Scheduled Commercial Bank authorized by RBI to import gold under the extant Foreign Trade Policy.

Refiners: The refineries accredited by the National Accreditation Board for Testing and Calibration Laboratories (NABL) and notified by the Central Government for the purpose of handling gold deposited and redeemed under GMS.

For extra knowledge: How banks and CPTCs are linked. How the gold deposited at CPTC reached the bank branches.

The designated banks can select and authorize the CPTCs out of the list notified by the Central Government for handling gold as their agents based on their assessment of the credit worthiness of these centres.
Each designated bank authorizing a CPTC to collect deposit of gold on its behalf shall ensure that its name is included in the list of such banks displayed by the CPTC.
Before tendering the raw gold to a CPTC, the depositor shall indicate the name of the designated bank with whom he would like to place the deposit.
After assaying the gold, the CPTC will issue a receipt signed by authorised signatories of the centre showing the standard gold of 995 fineness on behalf of the designated bank indicated by the depositor. Simultaneously, the CPTC will also send an advice to the designated bank regarding the acceptance of deposit.
The depositor shall produce the receipt showing the 995 fineness equivalent amount of gold issued by the CPTC to the designated bank branch.
On submission of the deposit receipt by the depositor, the designated bank shall issue the final deposit certificate on the same day or 30 days after the date of the tendering of gold at the CPTC, whichever is later.

Banking Awareness: Gold Monetization Scheme (GMS)