Most Indian households are sitting on gold that earns absolutely nothing. It just stays in a locker, collecting safety fees, while its value moves with the market. The Gold Monetisation Scheme changes that equation — your physical gold goes into a bank, earns interest, stays safe, and comes back to you at maturity in gold or cash.
Launched by the Government of India in September 2015, GMS was designed to do three things: pull idle gold out of lockers and homes, put it to productive use, and reduce India's dependence on gold imports. It's a government-backed scheme, low-risk by design, and the interest earned on it is currently exempt from capital gains tax and income tax — which is an advantage you won't find in most conventional investment options.
Here's everything you need to know before investing.
The GMS works essentially like a savings deposit — except you're depositing gold instead of money. You hand over your physical gold to a designated bank, the bank credits interest on it, and at the end of the tenure you get back either gold or the cash equivalent — depending on what you prefer and which deposit type you chose.
The interest under GMS is paid either in gold or in money equivalent. At maturity, the principal repayment can also come in a different form from what you originally deposited. You may put in jewellery and receive a coin or bullion. That's worth knowing upfront.
One thing GMS also replaces: locker fees. If you're paying annual rental charges just to store gold you never use, GMS eliminates that cost entirely while adding a return on top.
This is the most critical recent change to the scheme.
From 26 March 2025, the Medium Term Gold Deposit (MTGD) and Long Term Gold Deposit (LTGD) have been discontinued for fresh deposits and renewals. The government cited evolving market conditions as the reason.
What remains available: the Short Term Gold Deposit (STGD) — 1 to 3 years, with the lock-in period at each bank's discretion.
If you're evaluating GMS right now, STGD is your only option for new investments. Existing MTGD and LTGD deposits made before 26 March 2025 continue under their original terms.
Minimum deposit: 10 grams of physical gold. That's the entry point — whether it's jewellery, coins, or bars.
Maximum deposit: No cap. Individuals and institutions can deposit as much as they hold.
Type of gold accepted: Physical gold only — coins and bars. Jewellery with embedded stones or other metals is accepted only after purity testing and removal of non-gold components.
Nomination: Available. Standard nomination facility applies.
Tax benefit: Interest earned under GMS is currently exempt from capital gains tax and income tax, subject to prevailing tax laws at the time of redemption.
That last point — the tax exemption — is genuinely significant for anyone in a higher income bracket. Fixed deposits of the same value would be fully taxable. GMS interest isn't.
Deposit Type
Tenure
Lock-In Period
Status
Short Term Gold Deposit (STGD)
1–3 years
At bank's discretion
Active
Medium Term Gold Deposit (MTGD)
5–7 years
3 years
Discontinued (March 2025)
Long Term Gold Deposit (LTGD)
12–15 years
5 years
For anyone investing fresh, only STGD applies. The 1–3 year window is actually reasonable for most investors — it limits long-term commitment while still generating interest on gold that would otherwise earn nothing.
GMS interest rates in 2025 are as follows:
Short Term Gold Deposit (STGD): 0.5% to 2.5% per annum. The exact rate varies from bank to bank — each designated bank sets its own STGD rate within this band.
Medium Term Gold Deposit (MTGD): 2.25% p.a. — applicable only to deposits made before 26 March 2025.
Long Term Gold Deposit (LTGD): 2.50% p.a. — applicable only to deposits made before 26 March 2025.
The GMS interest rate isn't going to compete with equity returns. That's not the point. The comparison to make is against a bank locker — where you pay annual fees and earn zero. On that comparison, even 0.5% p.a. on gold is ahead.
The RBI has defined a broad eligibility list. The following are permitted to deposit gold under GMS:
Resident individuals
Hindu Undivided Families (HUFs)
Proprietorship firms
Partnership firms
Companies
Trusts — including ETFs and mutual funds registered under SEBI (Mutual Funds) Regulations
Charitable institutions
Central and state governments, and entities owned by them
Joint deposits are also permitted. Two or more eligible individuals can deposit gold together, and interest is credited to the joint deposit account accordingly.
The process involves a few more steps than a standard bank deposit — mainly because physical gold needs purity verification before it can be credited.
Step 1: If you're an existing customer of a bank offering GMS, visit a designated branch directly. If not, open a savings or current account with that bank first.
Step 2: Fill out the GMS application form at the branch. You'll get a customer copy — hold onto it.
Step 3: Within 7 days of filling the form, take your gold to the nearest Collection and Purity Testing Centre (CPTC). Carry your customer copy with you.
Step 4: Submit the gold at the CPTC. Give consent for the melting and assaying process — this is how purity is determined. Collect your deposit receipt from the CPTC. It will mention the gold quantity and purity.
Step 5: Your deposit certificate will be sent via courier and to your registered email. It details the quantity, purity, and scheme specifics.
The purity testing step is where jewellery with stones gets complicated. Non-gold elements are removed, the purity of the remaining gold is assessed, and only that quantity gets credited under the scheme. If your jewellery has significant stone setting, the depositable gold weight may be lower than expected.
Not every bank offers GMS. The designated banks currently participating include:
State Bank of India
ICICI Bank
HDFC Bank
Bank of Baroda
Punjab National Bank
Indian Overseas Bank
It's worth checking directly with your bank for current STGD rates before depositing — since the interest rates vary between institutions for the short-term deposit.
Principal: Repaid in gold or INR equivalent of the gold's value at the time of redemption. You choose.
Interest: Paid in INR, calculated based on the value of gold in Indian Rupees at the time the deposit was made.
One thing to keep in mind — you may not get back the gold in exactly the form you deposited. If you put in a 22K gold chain, the return might be in the form of a coin or standard bullion. The quantity and value are preserved — the form may not be.
For the discontinued MTGD and LTGD, premature redemption is only in INR — not gold. The applicable rates on early exit are:
After lock-in (3 years) but before 5 years: MTGD rate minus 0.375%
5 years to below 7 years: MTGD rate minus 0.25%
Above 5 years but below 7 years: MTGD rate minus 0.25%
7 years to below 12 years: LTGD rate minus 0.375%
12 years to below 15 years: LTGD rate minus 0.25%
For STGD, premature redemption terms — in INR or gold — are determined by the bank at the time of deposit. Ask before you sign.
Your gold earns instead of sitting. That's the headline benefit. Gold held in lockers is a dead asset — paying for storage, earning nothing. GMS converts it into an income-generating deposit without giving up the underlying gold value.
Encashment when gold appreciates. If gold prices rise significantly during your deposit tenure, the cash-equivalent repayment at maturity reflects that appreciation. You benefit from the price movement without holding a physical asset.
Flexibility in gold form. There's no requirement to deposit in a specific form. Coins, bars — all acceptable. No maximum limit means large holders, institutions, and trusts can participate without restriction.
Tax exemption on interest. Under current provisions, GMS deposits receive exemption from capital gains tax and income tax on interest earned. This is a material advantage for investors in higher tax brackets comparing GMS against other fixed-income instruments.
Reduced import dependency. This is the macro objective — and worth understanding because it underpins why the scheme has government backing and stability. GMS reduces the need for India to import fresh gold by putting existing household gold into productive circulation.
If you have idle physical gold — jewellery you don't wear, coins from years ago, bars sitting in a locker — GMS makes genuine sense as an alternative to storage.
It's not a high-return scheme. It never was. But compared to paying locker rental annually on gold that earns nothing, even 1% annual interest, tax-free, on government-backed deposits is a reasonable deal. And if gold prices rise during your tenure, the cash equivalent at maturity captures that gain too.
The only scenario where it gets complicated is jewellery with significant stone settings — where the depositable gold weight after purity testing may be less than you expect. Worth getting an informal assessment before committing.
A: Yes — GMS is backed by the Government of India, which makes it a low-risk option by any reasonable measure. The gold deposited is held safely by designated banks, and the scheme guarantees repayment of principal in gold or cash equivalent regardless of market conditions. It's about as secure as a government-backed deposit can be.
A: For the Short Term Gold Deposit (STGD) — the only type now available for fresh deposits — the GMS interest rate ranges from 0.5% to 2.5% per annum, varying by bank. The MTGD (2.25% p.a.) and LTGD (2.50% p.a.) interest rates apply only to deposits made before 26 March 2025.
A: The minimum deposit under GMS is 10 grams of physical gold — in any form (jewellery, coins, or bars). There is no maximum limit. Individuals, institutions, and even government entities can deposit as much gold as they hold.
A: The Sovereign Gold Bond (SGB) scheme involves buying government-issued gold-backed bonds in paper or demat form — you never hold physical gold. Under GMS, you deposit actual physical gold with a bank and earn interest on it, with the option to receive gold or cash at maturity. GMS suits those who already hold physical gold; SGB suits those looking to invest in gold without holding it.
A: Yes, but with a condition. Jewellery is accepted only after it goes through purity testing at a Collection and Purity Testing Centre (CPTC). Any stones, enamel, or non-gold components are removed before assaying. The gold credited under the scheme corresponds to the pure gold content remaining after this process — which may be less than the total weight of the jewellery.
A: For the Short Term Gold Deposit (STGD), the lock-in period is at the bank's discretion — ask your bank before depositing. The MTGD had a 3-year lock-in and the LTGD had a 5-year lock-in, but both have been discontinued for new deposits as of March 2025.
A: Yes. Under current provisions, GMS deposits are exempt from capital gains tax and income tax on the interest earned. These Gold Monetisation Scheme tax benefits make it notably more attractive compared to conventional fixed deposits, where interest is fully taxable as income.
A: Designated banks offering GMS include State Bank of India, ICICI Bank, HDFC Bank, Bank of Baroda, Punjab National Bank, and Indian Overseas Bank, among others. Since STGD interest rates vary between banks, it's worth comparing rates before deciding where to deposit.
A: Visit a designated branch of a GMS-participating bank, fill out the application form, and collect your customer copy. Within 7 days, take your gold and the customer copy to the nearest Collection and Purity Testing Centre (CPTC). After purity testing and melting, the CPTC issues a deposit receipt, and the bank sends your deposit certificate by courier and email. That's how to invest in Gold Monetisation Scheme.
A: For STGD, premature redemption terms — whether in gold or INR — are set by the individual bank. For existing MTGD and LTGD deposits, premature exit is only in INR and comes with a penalty of 0.25% to 0.375% deducted from the applicable interest rate depending on how long the deposit ran. Always clarify premature redemption terms with your bank before committing.
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