In many homes, gold remains locked away for sentimental reasons or as a safeguard for uncertain times. While it continues to be viewed as a trusted asset, idle gold does not actively help households build or grow their savings.

The gold monetisation scheme offers a practical solution by allowing individuals to deposit physical gold and convert it into a productive financial asset. Instead of selling gold, families can monetise gold assets, earn from gold through periodic returns, and participate in a government-backed gold deposit scheme.

These deposits follow clearly defined gold scheme terms, provide a declared gold interest rate, and function as a regulated gold savings scheme for households looking to use idle holdings more efficiently.

This GMS complete guide explains how the scheme works today, who can participate, how interest and redemption operate, and what risks to consider.

Understanding the Gold Monetisation Scheme

The Gold Monetisation Scheme (GMS) is a government-backed initiative that allows individuals and institutions to deposit physical gold with authorised banks and earn interest on it. The scheme is designed to bring household gold into the formal financial system by converting physical holdings into a regulated gold deposit account.

How It Works in Practice

The Gold Monetisation Scheme was introduced by the Government of India. It is implemented through scheduled commercial banks, authorised Collection and Purity Testing Centres (CPTCs), and refiners. These institutions follow strict guidelines to ensure transparency, safety, and accurate valuation.

What Happens After You Deposit Gold

After approaching an authorised CPTC or participating bank:

• Jewellery, coins, or bars are submitted for testing.

• Stones and non-gold components are removed

• The remaining gold is assessed for purity and weight

• The gold is refined and converted into standard bars

• Once this process is completed, the bank issues a Gold Deposit Certificate specifying:

  • Net weight of gold (in grams)
  • Purity
  • Deposit tenure

Interest starts earning on the deposited gold from the date it is converted into tradable gold bars or 30 days from the date of deposit, whichever is earlier, as per RBI guidelines.

Because the gold is refined, depositors do not receive back the same jewellery at maturity. Redemption occurs only in gold bars or cash, depending on the option selected at the time of deposit.

How the Scheme Connects Gold to the Formal Financial System

Deposited gold becomes part of the official gold reserves used by banks. Banks may lend this gold to jewellers or use it for other regulated purposes. This reduces India’s dependence on imported gold. At the same time, your idle household gold becomes a financial asset, similar to a fixed deposit.

Key Features and Scheme Terms

The gold scheme terms define how deposits operate, how interest is credited, and what choices are available at maturity.

Types of Gold Accepted

Under the Gold Monetisation Scheme, the following types of gold are accepted for deposit:

• You can deposit gold jewellery, coins, and bars.
• Stones and other non-gold parts are removed before testing.
• Only the pure gold content is considered for valuation.

Minimum and Maximum Deposit Limits

To open a gold deposit account, the minimum requirement is 10 grams of raw gold after removing stones or impurities.

There is no upper limit, making the scheme suitable for both small savers and larger depositors planning structured wealth deployment.

Deposit Tenure Options

As of 2026, the Gold Monetisation Scheme accepts new deposits only under the Short-Term Gold Deposit (STGD) category, which typically runs for 1 to 3 years.

Medium- and Long-Term Government Deposits (MTGD/LTGD), which earlier offered tenures of 5–7 years and 12–15 years respectively, were discontinued for new deposits from March 26, 2025, due to low participation and changing market conditions. Existing deposits under those categories continue until maturity.

Depositors should therefore evaluate the scheme today as a short- to medium-horizon gold savings arrangement rather than a long-term deposit instrument.

Interest Rate Structure

Interest is paid in Indian rupees and calculated based on the weight of gold deposited.

For active short-term deposits:

• The gold interest rate is determined by participating banks
• Rates are linked to prevailing market conditions
• Interest is credited in cash, not in gold

For the now-discontinued Medium- and Long-Term Government Deposit categories (MTGD/LTGD), interest rates were earlier fixed by the government at 2.25% and 2.5% per annum respectively.

Depositors should check directly with participating banks for the latest STGD rates, as these can change over time.

Redemption at Maturity

When opening the deposit account, the depositor must choose whether the principal will be redeemed:

• In gold bars, based on deposited weight, or
• In cash, at the prevailing market value

This choice is locked in at the beginning and cannot be changed at maturity.

Safety and Regulation

The scheme is regulated by government authorities and overseen by RBI-approved institutions.

• Testing and refining follow prescribed standards
• Deposits are handled only by authorised centres
• Documentation ensures transparency and traceability

Benefits of the Gold Monetisation Scheme

The Gold Monetisation Scheme offers several benefits if you own gold that is not being actively used. It helps you turn idle gold into a productive financial asset without the need to sell it.

Key benefits of the scheme include:

• You can earn from gold while keeping ownership in a formal system.
• You receive interest on gold based on the selected tenure.
• You make better use of idle gold rather than keeping it locked away.
• You can earn returns on idle gold through a government-backed savings scheme with a defined short-term deposit tenure.
• You avoid the risks associated with storing physical gold at home or in a locker.
• You gain a regulated and relatively low-risk gold investment option suitable for conservative investors seeking short-term gold exposure.
• You do not need to take a gold loan, as your gold itself earns returns.

Eligibility Criteria and Use of Idle Gold

Participation is open to:

• Individuals
• Hindu Undivided Families
• Firms and companies
• Trusts and charitable institutions
• Government entities

Eligible participants may deposit jewellery, coins, or bars that meet purity and documentation standards.

Conclusion

The gold monetisation scheme offers households a structured way to place unused gold into the financial system without selling it outright. Through a regulated gold deposit account, families can monetise gold assets, earn interest on gold, and improve idle gold usage.

With defined gold scheme terms and bank-determined gold interest rates, the scheme works as a short-term gold savings scheme for those seeking disciplined planning and conservative exposure to gold as an asset class.

While the Gold Monetisation Scheme suits households looking to earn returns on idle gold over the short term, some may prefer quicker access to funds without locking their gold into a deposit. In such cases, exploring a gold loan can offer an alternative route to meet immediate needs.

Explore Shriram Gold Loan to unlock quick valuation, flexible repayment options, and simple documentation—helping you turn your gold into short-term funds with clarity and confidence.

FAQs

1. What is the gold monetisation scheme and how does it work?

The Gold Monetisation Scheme allows you to deposit physical gold and earn returns. Deposited gold is verified, refined, and used in the market while you receive interest according to your chosen tenure.

2. Who can participate in the gold monetisation scheme?

Individuals, families, and institutions meeting the eligibility requirements can open a gold deposit account.

3. What types of gold are accepted under the scheme?

The plan usually accepts coins, bars, and jewellery, which are checked for purity before being deposited.

4. What are the benefits of depositing gold under this scheme?

You can earn from gold, boost long-term savings, and make better use of idle gold, making it suitable for investors seeking short- to medium-horizon gold exposure.

5. Is the interest earned on gold deposits taxable?

Yes. Interest earned under the gold monetisation scheme is generally taxable as income. If gold or cash is redeemed later, capital gains tax may also apply depending on the holding period and prevailing tax rules. Depositors should consult a tax advisor for the latest treatment.

6. How is the purity of gold assessed in the scheme?

Gold is tested for purity at authorised centres before depositing and subsequent use.

7. What happens to the gold after it is deposited?

Deposited gold is cleaned up and used to meet market or industrial demand, while you continue to earn interest.