Govt Pulls The Plug On Gold Monetisation Scheme

Within months of announcing the end of the Sovereign Gold Bond scheme, the government appears to have also pulled the plug on the Gold Monetisation Scheme, launched with much fanfare in 2015. Today, the government discontinued the gold deposit scheme, under which banks accepted physical gold, paid 2.25–2.5% annual interest on its value, and returned either gold or the rupee equivalent at maturity.

The medium- and long-term maturity plans of the gold deposit schemes will be discontinued, while banks, at their discretion, can continue offering the short-term plan, which has a maturity of 1–3 years.  

Gold already deposited under the scheme will continue to be held until redemption. The RBI, however, in a notification, clarified that existing deposit matured before March 25, 2025 but was not redeemed will be closed.

The scheme was primarily launched to recycle gold jewellery held by individuals and religious trusts to reduce India's reliance on gold imports.

However, unlike sovereign gold bonds—which became a burden on the exchequer due to rising gold prices—the gold deposit scheme never really took off, despite undergoing several changes to make it more attractive.

According to a report, only 21 tonne of gold were mobilised under the scheme in its first eight years. 

To put this into perspective, India’s household gold stock is estimated at about 25,000 tonne, and the country imports 600–1,000 tonne of gold every year. Most imported gold is used to make jewellery, which remains popular as a traditional savings instrument, apart from its ornamental purposes.

Also read: 
Sovereign Gold Bonds Lose Midas Touch For Govt
A Golden Blunder: The Costly Mistake Of Tackling India’s Gold Obsession