Last Updated on April 23, 2026 by teamtfl
“Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants – but debt is the money of slaves.” – Norm Franz
India holds somewhere between 25,000 and 30,000 tonnes of gold. That is roughly 11% of all the gold ever mined in human history, sitting in lockers, safes, cupboards, and bank vaults across the country. A large portion of it earns nothing. It does not grow. It just sits there – a store of value that incurs storage cost and risk with no active return.
The Gold Monetization Scheme (GMS) was launched in 2015 to change this. The government’s idea was straightforward: let households deposit their idle gold with banks, earn interest on it, and get the same gold (or its cash equivalent) back at the end of the term.
⚡ Quick Answer
The Gold Monetization Scheme lets you deposit physical gold with banks (minimum 10 grams after purity testing) and earn interest of 0.5-2.5% p.a. depending on the tenure, along with the full benefit of any appreciation in gold prices. Available in short-term (1-3 years), medium-term (5-7 years), and long-term (12-15 years) variants. Capital gains on maturity are exempt from tax. The main practical constraint: gold is melted during the purity testing process – jewellery with sentimental value is not recoverable in its original form. GMS is most suited for bulk inherited gold or bars/coins with no sentimental attachment.
How the Gold Monetization Scheme Works
The process begins at a Purity Testing Centre (PTC) – there are government-certified centres across major cities. You bring your gold, and it is first scanned to estimate purity. If you agree to proceed, it is then melted to determine exact weight and purity. At this point, the gold has lost its original form permanently. You receive a purity certificate.
With this certificate, you open a Gold Savings Account at a participating bank. The account is credited with the exact weight of pure gold you deposited. You earn interest on this balance, credited semi-annually, and calculated on the gold quantity (not the rupee value). At maturity, you receive back either gold (as bars or coins – not in original jewellery form if that is what you deposited) or the cash equivalent at prevailing gold prices.
The minimum deposit is 10 grams after purity testing. There is no upper limit. You can deposit gold in any form – bars, coins, or jewellery – though jewellery studded with gems is not accepted (stones are removed and returned to you).
The Five Real Benefits
Interest income on an otherwise idle asset. Physical gold sitting in a locker earns nothing. GMS converts it into an interest-bearing instrument. At 2.5% per annum on a medium-term deposit, you earn roughly 2.5% of the gold price each year – at current prices (gold at Rs 9,000-9,500/gram as of 2026), that is approximately Rs 225-240 per gram per year, in addition to any appreciation in gold price.
Elimination of storage cost and theft risk. A bank locker costs Rs 3,000-6,000 annually and carries residual theft risk. GMS eliminates both costs. Your gold is held in the banking system with sovereign guarantee.
Full capital appreciation benefit. Unlike a fixed deposit where your principal is fixed in rupee terms, GMS principal is denominated in gold grams. If gold price rises from Rs 9,000 to Rs 12,000/gram during your deposit, you benefit fully from that appreciation – plus your interest.
Tax-free gains at maturity. Capital gains on gold deposited and redeemed through GMS at maturity are exempt from tax. The interest income is taxable as per your slab rate, but the capital appreciation component is tax-free. This is a significant advantage over physical gold sales (which attract capital gains tax) and over SGBs sold before maturity in the secondary market.
Potential use as loan collateral. GMS deposits can be pledged as collateral for loans at participating banks, giving you liquidity options without selling your gold position.
Idle gold is a missed opportunity cost.
RetireWise reviews your complete asset picture – including physical gold – and identifies where idle assets can be put to work within your overall retirement plan.
The Practical Constraints Worth Knowing
The melting process is the most significant practical barrier. If the gold has sentimental value – ancestral jewellery, a piece made for a wedding – GMS is not appropriate. The purity testing process is irreversible once the gold is melted. Many Indian families find this emotionally difficult, even when the economics make sense.
Participation has been limited since the scheme’s launch, partly because of this barrier and partly because the interest rates, while better than nothing, are not dramatic. A 2.5% return on gold when gold is already expected to appreciate is incrementally attractive, but it does not transform gold into an income-generating asset the way equity does.
The practical population for GMS is families who have inherited bulk gold in bar or coin form (not jewellery), or those who have purchased investment gold that they are willing to hold in paper form for an extended period.
GMS vs Sovereign Gold Bonds vs Gold ETFs
Since new SGB issuances were discontinued in February 2024, the comparison landscape has shifted. For new gold investment, the choice is primarily between GMS (for physical gold you already own), Gold ETFs (for new investment without physical gold), and secondary market SGBs (for those willing to navigate thin liquidity).
GMS is for holders of existing physical gold who want to earn returns on it without selling. Gold ETFs are for those who want to add gold exposure without holding physical gold. These are different problems with different solutions.
Read: Sovereign Gold Bonds: Complete Guide for Indian Investors
If you have inherited gold or investment gold sitting idle in a locker – and you have no sentimental attachment to its physical form – GMS is a genuinely good scheme. You earn interest, keep full gold price exposure, and get tax-free capital gains at maturity. The barrier is psychological, not financial.
Let your gold work as hard as you did to acquire it.
How much of your net worth is sitting in idle physical gold?
RetireWise includes physical gold in your complete net worth analysis and retirement planning – so you can see exactly what each asset class is contributing (or not contributing) to your goals.
Your Turn
Have you considered GMS for idle gold you hold? What is stopping you – the melting process, the lock-in, or something else? Share in the comments.
I need help for 1 question. Let us say I have 100 grams of physical gold which I invest in Gold Monetization Scheme.
There are 2 parts about capital gains –
1. Capital gains after the maturity – this is very much clear – no capital tax at the time of maturity
2. Capital tax on the date of investment – will the conversion of my physical gold on the date of investment in Gold Monetization Scheme, will this be considered as sale of gold ? Basically the confusion is that will I have to pay capital gain tax in the year of investment because my gold is not converted into bank deposit / certificate?
Don’t know which woman will agree to put her gold jewellery in the banks. There is always a function or a marriage that people attend every now and then and that is where women love to wear Gold jewellery. So I don’t think this will attract the investors very much. Plus the annual interest rate of just 2.5 % does not give anyone too much of joy.
thank you so much for sharing this info…its helpful..great blog
thank you so much for sharing this info…its helpful..great blog
thank you so much for sharing this scheme about gol and thier monetization
This is really a good scheme.proper marketing by the government and professionals like you are needed.you have done a great service explaining the merits of the scheme.this avoids keeping physical gold which is a great relief.Decent appreciation..tax benefits …what more do you need?
I see advantages of the scheme. But there are hardly any banks and branches where the scheme can be availed of. Without a nearby bank branch and a nearby assaying centre, the scheme is very difficult to use. If you know which banks and which branches in Ahmedabad have implemented the gold monetization scheme, please let me know.
I have big doubt this type scheme become successful for common.
Gold is psychological investment not for gains.
Plus you are asking to melt them , who will give his treasured gold .
Only I assume people with useless gold bar are the target , don’t know how cash converted gold bars banks are willing to take .