Gold Monetisation Scheme

The Gold Monetisation Scheme (GMS) converts idle gold held by households and institutions into an interest-bearing gold deposit. The deposited gold is assayed, refined and channelled through the formal financial system for uses such as lending to jewellers or sale to permitted users, thereby potentially reducing dependence on imported gold.

How privately held gold enters the system

The scheme replaces the passive holding of jewellery, bars or coins with a bank deposit whose value is recorded in terms of gold.

• A depositor submits eligible gold through a designated bank or an authorised collection and purity-testing channel.
• The gold is tested for purity and, after the depositor's consent, melted and converted into standard bullion.
• The designated bank issues a deposit certificate or opens a gold deposit account showing the quantity of pure gold credited.
• The depositor earns interest according to the applicable deposit terms and receives redemption in gold or its rupee equivalent as permitted by the relevant product.

How the mobilised gold is put to productive use

Once refined, the gold becomes part of the organised bullion and banking system instead of remaining physically locked in private holdings.

• Banks may use mobilised gold to provide gold metal loans to jewellers, supporting their working-capital requirements without requiring an equivalent fresh import.
• Banks may sell the gold to jewellers and other users through channels permitted by the Reserve Bank of India.
• Under government-account deposit components, the mobilised gold could be auctioned and the proceeds credited to the Central Government's account.
• Domestic recirculation of existing gold can substitute for part of fresh import demand, thereby easing pressure on foreign exchange and the current account.
• Formal assaying and refining also bring privately held gold into standardised and traceable market channels.

Deposit structure and policy evolution

The original framework combined bank-managed short-term deposits with medium- and long-term deposits accepted on behalf of the Central Government.

• Short-Term Bank Deposits are liabilities of designated banks, and their availability and terms are determined by banks within the regulatory framework.
• Fresh Medium-Term and Long-Term Government Deposits were discontinued with effect from 26 March 2025.
• Government deposits accepted before their discontinuation continue to be governed by the applicable terms until redemption.

Economic significance and limitations

• The scheme offers a return on gold that would otherwise remain idle in lockers or private custody.
• It expands the domestic supply of recyclable gold and strengthens the formal gold market.
• Its effectiveness depends on depositor trust, convenient assaying facilities, attractive returns and willingness to permit jewellery to be melted.
• Sentimental attachment to jewellery and concerns about purity valuation can limit participation.
• The scheme reduces import demand only to the extent that mobilised domestic gold actually substitutes for newly imported gold.

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