Government Ends Gold Monetisation Scheme Amid Surging Prices; Short-Term Deposits to Continue

March 26, 2025: The government has announced the discontinuation of the Gold Monetisation Scheme (GMS) for medium- and long-term deposits, citing evolving market conditions and low participation. However, short-term deposits will continue at the discretion of banks, the Ministry of Finance said in a statement issued on Tuesday.

The decision comes amid a sharp rise in gold prices, which have surged 41.5% in the past year, reaching ₹90,450 per 10 grams as of March 25, 2025.

Gold Monetisation Scheme: An Overview

Introduced in November 2015, the Gold Monetisation Scheme aimed to bring privately held gold into the banking system and reduce India’s dependence on gold imports. The scheme allowed individuals and institutions to deposit idle gold in banks, which could be later redeemed with interest.

GMS offered three types of deposits:

• Short-term deposits (1-3 years): Managed by banks
• Medium-term deposits (5-7 years): Managed by the government
• Long-term deposits (12-15 years): Managed by the government

The minimum deposit was 10 grams of gold, with no upper limit.

Government’s Justification for Discontinuation

The Ministry of Finance stated that the performance of medium- and long-term deposits had been reviewed, and the scheme was found to be not viable under current market conditions. The Reserve Bank of India (RBI) confirmed that no new deposits under these categories will be accepted after March 26, 2025. However, existing deposits will remain active until maturity.

Gold Deposits Mobilised Under GMS

As of November 2024, approximately 31,164 kg of gold had been mobilised under the scheme:

• 7,509 kg in short-term deposits
• 9,728 kg in medium-term deposits
• 13,926 kg in long-term deposits

Around 5,693 depositors had participated in the scheme.

End of Another Gold Scheme

This is the second gold-related scheme to be discontinued by the government in recent months. Earlier, the Sovereign Gold Bond (SGB) scheme was also stopped due to its high costs.

The government has not announced any new issuances of sovereign gold bonds in the 2025-26 Budget. Economic Affairs Secretary Ajay Seth had earlier stated that the cost of borrowing through SGBs was too high, making it unfeasible for the government.

The move signals the government’s strategy to reduce reliance on gold imports while encouraging alternative financial investment options.

Source: The Indian Express