Winning Bizness Desk

Mumbai. The Government of India has officially discontinued the Gold Monetisation Scheme (GMS) for medium- and long-term deposits, effective from Wednesday, March 26, 2025. The move comes nearly a decade after the scheme was introduced in 2015 by Prime Minister Narendra Modi to mobilise idle gold held by households and institutions. Despite the discontinuation, the Reserve Bank of India (RBI) has assured investors that existing gold deposit accounts will remain active, and depositors will continue to earn interest until maturity.

Initiative Was Designed to Reduce India's Dependence on Gold Imports

The GMS allowed individuals to deposit their unused gold with participating banks, earning a fixed interest rate on their holdings. This initiative was designed to reduce India's dependence on gold imports by channeling privately held gold into the banking system. Since its launch, India’s gold imports have seen a decline, indicating that the scheme played a role in curbing excessive import demand. However, due to various economic factors, the government has now decided to end the scheme for medium- and long-term deposits while leaving short-term deposits to the discretion of individual banks.

Under the GMS, investors could deposit gold in any form, including bullion or jewellery. Once deposited, the bank would send the metal for purity testing, after which a certificate specifying the quantity, price, and purity was issued. Based on this certificate, a gold deposit account was opened in the investor’s name, and interest earnings would commence from the date of deposit. The interest, which ranged between 2.25% and 2.50%, was either paid at regular intervals or upon maturity, depending on the investor’s preference and bank policies. Upon maturity, depositors had the option to either receive their gold in physical form or encash their investment.

Existing deposits Will Continue to Be Valid Until Redemption

Following the Finance Ministry’s notification on Tuesday, the RBI clarified that all existing deposits made under the scheme will continue to be valid until redemption. This means that investors whose accounts were opened on or before March 25, 2025, will not be affected by the discontinuation. They will continue earning interest on their deposits, and the safety of their investments is assured. However, no new accounts will be opened under the medium- and long-term categories from March 26 onward.

Sharp Rise in Gold Prices in The Key Reason

One of the key reasons behind discontinuing the scheme is the sharp rise in gold prices. In 2024, gold prices surged by approximately 25%, and in 2025, they have already increased by around 14% Year-To-Date (YTD). This price surge has made it challenging for the government to sustain the scheme, as the rising value of gold has impacted the financial feasibility of such deposits. Commodity experts suggest that the government might also consider discontinuing the Sovereign Gold Bond (SGB) Scheme in the near future, given the prevailing market conditions.

While the government has halted medium- and long-term gold deposit schemes, short-term deposits remain operational at the banks' discretion. Investors looking for alternatives may still explore other gold investment avenues such as digital gold, gold ETFs, or sovereign gold bonds if they remain available. The discontinuation is a significant policy shift, reflecting the government's evolving approach toward managing the gold market and its economic impact.

1. Medium- and Long-Term GMS Discontinued – The government has stopped new deposits under these schemes from March 26, 2025.

2. Existing Deposits Remain Safe – RBI confirms that all gold deposit accounts opened on or before March 25, 2025, will continue earning interest.

3. Gold Monetisation Scheme Overview – Investors deposited idle gold with banks, earning 2.25%-2.50% interest while helping reduce gold imports.

4. Gold Prices Behind the Move – The government struggled to sustain GMS as gold prices surged by 25% in 2024 and 14% in 2025 YTD.

5. Short-Term GMS Still Active – Banks may continue offering short-term deposits, but medium- and long-term options are discontinued.