Gold Monetisation Scheme

The Gold Monetization Scheme (GMS) was announced in the Union Budget Speech of 2015-16.

Gold Monetization Scheme (GMS) refers to a process wherein a depositor deposits gold (say jewellery, coin, etc.) with a bank which is then lent by the bank to its borrowers (say jewellery makers), after melting into gold bars. This is akin to a normal banking operation (like a savings bank account), but carried out in terms of gold instead of in rupee.

Gold can be submitted in any form (bullion, jewellery etc) but the amount deposited with the bank is calculated on the basis of the pure gold content of that deposit (after removing the weights of precious stones in jewellery etc.), which is verified through an accredited assayer. Both principal and interest to be paid to the depositors of gold, will be ‘valued’ in gold. For example if a customer deposits 100 gms of gold and gets 1 per cent interest, then, on maturity he has a credit of 101 gms. The customer will have the option of redemption either in cash or in gold, which will have to be exercised in the beginning itself (at the time of making the deposit).

The basic idea behind the scheme is to mobilize the gold lying idle and put it to productive use. India is one of the largest consumers of gold in the world; however, it has to rely on imports to meet around 80 per cent of its demand for gold. Gold imports contributed to nearly 30 per cent of trade deficit during 2009-10 to 2011-12. In this context, an idea that has gained currency is to monetize the gold which is lying idle with the households and other entities within India and make it available for re-use.

Objectives of the Scheme:

  • To mobilize the gold held by households, trusts and various institutions and put it into productive use.
  • To provide a fillip to the gems and jewellery sector.
  • To reduce the reliance on import of gold in the long run to meet the domestic demand.


  1. The minimum quantity of gold that a customer can bring is proposed to be set at 30 grams to encourage small depositors.
  2. Tenure of Deposits: Short Term (1-3 yrs), Medium Term (5-7 yrs), Long Term (12-15 yrs).
  • For Short Term – the customer will have the option of redemption – either in Cash or in Gold.
  • For Medium & Long Term– redemption of principal will be in gold or cash but interest would be paid Only in Cash.