Gold Monetisation Scheme

Gold Monetisation Scheme

Indians have always been excessively obsessed with gold. Either one owns a lot of gold, or one is always desirous of owning some. No matter what the price of gold may be, it is something every Indian wants. And for no reason at all! For an average Indian, gold is just a matter of liking, notwithstanding the financial implications and impact of this unruly obsession on the economy of the country.

The Gold Monetisation Scheme of GOI

The Government of India introduced a new and unified Gold Monetisation Scheme in the Union Budget of 2015–16, to replace all the existing schemes catering to monetisation of gold. For the citizens, the Gold Monetisation Scheme is a way to help them earn interest on their unused gold lying idle in the bank lockers. But the wider goal, on part of the government, the scheme is basically a new deposit tool to ensure mobilization of gold possessed by various families and institutions in India, and use this mobilized wealth in the form of gold as an asset for the country’s growth, which otherwise is lying idle.

Why is there a need of a Gold Monetisation Scheme?

While announcing several steps for monetizing gold in his Budget 2015–16, Union Finance Minister Arun Jaitley stated that stocks of gold in India were estimated to be over 20,000 tons but mostly this gold was neither traded, nor monetized.

From an average citizen’s perspective, the heaps of gold lying in the locker appreciate in value if gold price goes up but it doesn’t pay you a regular interest or dividend. On the contrary, you incur carrying costs on it, in the form of bank locker and maintenance charges. The gold lying at your home is a stress-bait in itself.

Most importantly, this immense wealth in the form of jewelry, coins or bars doesn’t happen to be of any use to the country, or to any individual for that matter! It is not adequately taxed, sometimes hidden and becomes an easy exit for the black money to escape the mainstream financial system of the country.

Therefore, it was deemed important on government’s part to bring in this idle lying money into the mainstream financial system, and reap its benefits for the betterment of the economy. Hence, this unique Gold Monetisation Scheme was introduced.

What is there in it for YOU?

The monetization scheme will allow you to earn some regular interest on your gold and save you carrying costs as well. It is a gold savings account, similar to the ordinary savings account you have in banks, which will earn interest for the gold that you deposit in it. Your gold can be deposited in any physical form — jewelry, coins or bars. This gold will then earn interest based on gold weight and also the appreciation of the metal value. You get back your gold in the equivalent of 995 fineness gold or Indian rupees- whatever way you desire.

Why is the Government pushing for such scheme?

Apart from the benefit of the citizens, the government has its own reasons for pushing the scheme so hard. There’s a lot of economics involved over here. Gold is a part of FOREX reserves of government and is used in international trading. Every year, the government imports almost 1000 tons of gold to meet its needs. When at least some of the 20,000 tons of gold that are lying vacant in bank lockers, households and temples of India reaches the government, the government will need to borrow less from the international market for its import payments, hence bringing down the unnecessary expenditure.

Secondly, the scheme has been designed in such a way that it may lure the black money holders, who have tried to disguise their illegal money in the form of gold. The scheme may help in unearthing such black money hoardings, to some extent.

What will the Banks do with your Gold?

Once you take your gold to a bank counter and register for the metal deposit account, your gold assets will be checked for purity, and the net worth of the metal will be your investment. The designated banks may sell or lend the gold accepted under the short-term bank deposit to MMTC for minting India Gold Coins and to jewelers or sell it to other designated banks participating in the scheme, at an interest rate slightly higher than being offered to you. Nevertheless, your gold assets, be it jewelry, coins or bars will be melted and you will not get them back in the very same form.

Salient features of the Gold Monetisation Scheme

· A minimum deposit of 30gm of raw gold (bar/coin/jewelry) is required under the scheme.

· There is no upper limit of investment under the Gold Monetisation Scheme.

· The designated banks will accept gold deposits under three-term conditions:

– Short Term (1–3 years)

– Medium Term (5–7 years)

– Long term (12–15 years)

· An interest rate of up to 2.50% per year will be offered under the scheme, depending upon the term of deposit. This is higher than all previous rates offered on gold investments.

· An option of premature withdrawal is open after a minimum lock-in period of 1 year. However, there is a penalty for all such withdrawals.

Steps to get your Gold Monetised

1. Visit the nearest Collection and Purity Testing Center, get your gold tested, melted and certified.

2. Take the certificate to your bank, and open a metal account.

3. The bank will credit your amount of gold to your account.

4. Give your consent for the duration, and mode of return of your value. (gold/cash)

5. Start earning interest!!

Outcomes of the Gold Monetisation Scheme, so far.

The outcomes of the scheme have not been very encouraging so far. There are genuine concerns over the infrastructural support of the testing and hallmarking centers, majorly pertaining to the trust factor. Out of the total 20,000 tons of idle gold targeted under this scheme, a major chunk is lying with the households, which are neither very enthusiastic nor aware of the scheme. So far, only three or four tons is estimated to have been mobilized under the scheme, within six months of its operation. (the figures last available).

Pros and Cons of the Gold Monetisation Scheme.

For Citizens


· Best use of broken, unusable, junked jewelry.

· Best way to earn money on the old bars and coins lying vacant.

· Added bank security to your possessions.

· No carrying costs.

· Higher than ever interest rates.


· You have to part with your gold in the original form.

· The gold is fixed for a term and attracts penalty on premature withdrawal.

For Government


· The Govt. will have more reserve of gold now, which it uses to meet the foreign exchange.

· No need to import gold from the international market every year, cut in the expenditure of govt.

· People will earn more through interest, good for the economy.

· People who have stacked piles of gold through black money will be unearthed by this seemingly attractive scheme.


· Many of the citizens preserve their gold assets for the sake of wearing, or as a mark of remembrance. They will be reluctant in investing in such a scheme.

· It will not be easy to procure the immense amounts of gold lying in the temples of the country, where it carries a religious and cultural significance.