Gold mobilized under gold monetization scheme FY 2016-2022, by deposit type

In the financial year 2022, a cumulative of around 25,080 kilograms of gold was deposited in short, medium, and long-term gold deposits, under the gold monetization scheme (GMS) in India. Most amounts of gold were held in long -term deposits. The government introduced this scheme to mobilize idle gold and reduce the country's dependence on import of the metal.

What is the Gold Monetization Scheme?

The Gold Monetization Scheme was introduced during the Union Budget of the fiscal year 2016 as a revamped version of the existing Gold Deposit Scheme and Gold Metal Loan Scheme. The main aim was to effectively utilize the gold stored in Indian households. It was envisioned that this would reduce the dependence on gold imports and meet the domestic demand for the yellow metal. The program offers three types of deposits: short term deposits (1-3 years); medium term deposits (5-7 years), and long-term deposits (12-15 years). It allows the beneficiary to earn up to 2.5 percent interest depending on the chosen tenure. The interest earned on the gold deposits is exempt from capital gains tax, wealth tax, and income tax.

Review of the scheme

The scheme had few takers because of the sentimental value attached to the gold. Customers particularly did not entertain the idea of their gold jewelry being morphed into pure gold. The Ministry of Finance has been in talks with the Reserve Bank of India to conduct a review of the scheme since the costs associated with the scheme were much higher than anticipated. It has not yet delivered the desired results of monetizing gold holdings and reduction in gold imports.