The Centre will discontinue the medium- and long-term deposits under the government’s gold monetisation scheme (GMS) starting March 26, 2025, according to an official release by the Union Ministry of Finance on March 25.
“Based on the examination of the performance of GMS and the evolving market conditions, it has been decided to discontinue the medium-term and long-term government deposit (MLTGD) components of the GMS w.e.f. March 26, 2025,” the Union Ministry of Finance announced in a statement.
The government has cited changing market conditions and performance of the GMS as reasons for discontinuing the scheme. Additionally, up until November 2024, around 31,164 kg of gold has been mobilised under GMS, the statement said.
What is GMS
GMS is an updated version of the older gold deposit scheme (GDS), which was launched in September 2015 with the aim of mobilising households to deposit or sell their gold with banks in an attempt to reduce the country’s gold import and reduce the current account deficit.
GMS consists of three components:
Short-term deposit - The tenure varies between 1 year and 3 years.
Medium-term deposit - The tenure varies between 5 years and 7 years.
Long-term deposit - The tenure varies between 12 years and 15 years.
Under GMS, gold bonds were given in denominations of 5 grams, 10 grams, 50 grams and 100 grams for a tenure of 5-7 years at a rate of interest to be determined based on the value of the metal at the time of investment. Under the scheme an individual could deposit gold up to 500 grams in a year.
The rate of interest paid on the short-term deposits under the scheme would have been decided by the banks based on the existing international lease rates, other expenses and market conditions. Meanwhile, for the medium and long-term gold deposits, the interest rate of interest was determined by the government, after consulting with the RBI and approved by the central government. The interest rate for medium term bonds stood at 2.25 per cent and for long term bonds it stood at 2.5 per cent.
Pre-Existing Deposits to Continue
The Union Ministry of Finance said that any gold deposits made at the authorised collection and purity testing centre or GMS mobilisation, collection and testing agent (GMCTA) or the designated bank branched will be unacceptable starting March 26, 2025. However, pre-existing deposits will continue until their redemption.
Also, short-term deposits by banks under GMS will continue, based on individual banks, according to the commercial feasibility determined by them. RBI, is however, yet to release a detailed guidelines on this issue.
Incidentally, this would be the second gold scheme to be discontinued by the Centre on the back of surge in gold price. The Centre has also announced the closure of issuance of sovereign gold bonds (SGBs). Recently, gold prices in India surged to an all-time high of Rs 92,000 per 10 grams.
