Gold Monetisation Scheme

27.03.2025

Gold Monetisation Scheme

Why in the news?                        

          The Government of India has discontinued Medium-Term and Long-Term Government Deposits (MLTGD) under the Gold Monetisation Scheme (GMS) from March 26, 2025.

 What is the Gold Monetisation Scheme?

• Launched: November 2015, as an improved version of the existing Gold Deposit Scheme (GDS) and Gold Metal Loan (GML) Scheme.
• Allows individuals, institutions, and even government entities to deposit idle gold in banks and earn interest instead of storing it in lockers.
• Depositors can redeem the gold deposit in cash, gold bars, or coins upon maturity, but not in the same form (jewellery, bars, or coins).

Objective:

• To mobilize idle gold held by households and institutions.
• To bring gold into the formal economy and reduce gold imports, thereby helping reduce the Current Account Deficit (CAD).

Types of Gold Deposits under GMS

The GMS consisted of three components:

(1) Short Term Bank Deposit (1-3 years);

(2) Medium Term Government Deposit (5-7 years); and

 (3) Long-Term Government Deposit (12-15 years).

Other Gold-Related Schemes

• Sovereign Gold Bond (SGB) Scheme: Discontinued recently along with medium- and long-term GMS deposits.
  • Gold bonds were issued in denominations of 5g, 10g, 50g, and 100g.
  • Aimed to reduce demand for physical gold.

• Indian Gold Coin Initiative: Launched alongside GMS and SGB in 2015.
  • First-ever national gold coin with Ashoka Chakra emblem.

                                     Source: Indian Express

Consider the following statements regarding the Gold Monetisation Scheme (GMS):

Statement-I: Under the scheme, individuals and institutions can deposit their idle gold with banks and earn interest on it.

Statement-II: Upon maturity, depositors have the option to redeem their gold in its original form, such as jewellery, bars or coins.

Which one of the following is correct in respect of the above statements?

A.Both Statement-I and Statement-II are correct, and Statement-II is the correct explanation for Statement-I.

B.Both Statement-I and Statement-II are correct, and Statement-II is not the correct explanation for Statement-I.

C.Statement-I is correct, but Statement-II is incorrect.

D.Statement-I is incorrect, but Statement-II is correct.

Answer C