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Gold Monetisation Scheme: Why should you choose, interest rate, benefits, other details

Fri Dec 13 2019


People usually worry about the storage of the physical gold, for this they prefer to keep the yellow metal in the bank locker. Banks charge the customers for using a bank locker facility. One way to keep your idle physical gold safe is by depositing it in Gold Monetisation Scheme (GMS). It allows the individuals, households and institutions to earn interest on their gold holding.


Why you should deposit in Gold Monetisation Scheme

Most of the Indian families prefer to keep their gold at home or in the bank lockers. But it may be noticed that keeping the gold at home comes at a cost. If you do not keep it in the locker for safety purpose then you may have to compromise with its safety at home. But, depositing it in GMS, saves you from paying locker fees and also helps you to earn up to 2.5 per cent interest annually.


This way one can enjoy the value of appreciation of their gold and also save the storage cost. It also offers tax benefits such as one can save tax as the interest earned and the capital gains on the gold deposit under this scheme both are exempt from tax.


What is Gold Monetisation scheme-


With an aim to mobilise idle gold held by the Indian families and reduce the dependence on imports of the yellow metal by narrowing the current account deficit, the government introduced GMS in 2015. Under this scheme, the depositor can deposit a minimum of 30 grams of raw gold in the form of bars, coins, jewellery excluding the stones and other metals. However, there is no cap on the maximum amount of gold that can be deposited. The deposits under GMS is held by banks on behalf of the Centre, who also decides the interest rate.


How to make deposits under GMS-


The deposits have to be made at a government certified centre called Collection and Purity Testing Centre (CPTC). CPTC will test the purity of your gold and give you a certificate, specifying the quantity of the gold deposited by you. You can take this certificate to a bank to open an account under this scheme. The account represents the amount of gold the depositor is holding with the bank. At the time of redemption, the depositor has the option to take either cash or gold. However, the redemption preference has to be mentioned at the time of deposit. Here you have the option to choose the tenure for which you want to deposit the gold. Longer the tenure, higher is the interest.  


If you make a short term gold deposit (1-3 years) then the interest rate will be decided by the bank. For instance, State Bank of India (SBI) offers 0.50 per cent interest for one year and 0.60 per cent interest for 2-3 year tenure. Both the principal and interest shall be denominated in gold. You can take the interest annually or can accumulate it till the maturity. In case you make a medium-term gold deposit (5-7 years) then the interest rate is 2.25 per cent, which is paid by the bank on behalf of the government. However, in case of a long term gold deposit (at least 12 years and maximum of 15 years), one will earn an interest rate of 2.5 per cent in this scheme.