The government has decided to discontinue the medium- and long-term deposit categories under the Gold Monetisation Scheme (GMS) starting March 26. The Ministry of Finance cited evolving market conditions and the scheme’s performance as key reasons for its withdrawal. The move comes amid a significant rise in gold prices, which has influenced policy decisions regarding gold-related financial instruments. However, the government has clarified that short-term deposits under GMS will continue, with banks having the discretion to assess their commercial viability.
The Reserve Bank of India (RBI) has assured depositors that all existing deposits under the scheme will remain safe and unaffected. Depositors will continue earning interest on their gold deposits as per the originally agreed terms. The central bank has also emphasized that the premature withdrawal and redemption process for existing deposits will follow the same guidelines set at the time of deposit.
The Gold Monetisation Scheme, introduced in 2015, aimed to mobilize idle gold held by households and institutions while reducing India’s reliance on gold imports. It allowed individuals and entities to deposit their gold in banks and earn interest on it, with an option to withdraw it in gold or cash at maturity. Despite the scheme’s intent, it struggled to gain widespread acceptance due to concerns over trust, valuation mechanisms, and the reluctance of households to part with their physical gold.
The withdrawal of sovereign gold bonds in recent months signaled the government’s shifting stance on gold-linked financial instruments. With gold prices reaching record highs, authorities have reassessed the need for schemes like GMS and their impact on financial markets. The discontinuation of medium- and long-term gold deposits is seen as a step toward streamlining gold-related policies.
Market experts believe that the government’s decision will impact individuals and businesses that viewed GMS as a secure long-term investment. While short-term deposits remain an option, the lack of medium- and long-term alternatives may discourage large-scale participation in gold monetization. Financial analysts have noted that the scheme’s discontinuation could increase direct gold purchases, influencing domestic demand and prices.
Jewelry associations and bullion traders have expressed mixed reactions to the announcement. Some industry representatives argue that GMS never gained significant traction due to complex procedures and low awareness. Others believe that the government should have revamped the scheme instead of discontinuing key deposit categories. They suggest that a more flexible approach, including higher interest rates and simplified withdrawal mechanisms, could have encouraged more participation.
The Ministry of Finance has indicated that it will review gold-related policies to introduce alternative investment options. The focus will likely shift to sovereign gold bonds and digital gold platforms, which have shown growing acceptance among investors. However, financial institutions have urged the government to consider introducing new incentives for gold monetization to ensure continued participation from gold holders.
RBI officials have reiterated that individuals holding deposits under GMS do not need to take any immediate action. Banks will continue servicing existing deposits, and the maturity process will proceed as originally planned. The central bank has also encouraged banks to evaluate the viability of continuing short-term gold deposits, which could provide an alternative for those still interested in the scheme.
With the discontinuation of the Gold Monetisation Scheme, investors now have fewer options to earn returns on idle gold. Many may turn to private gold-backed investment products or traditional gold savings methods. The government’s next steps in managing gold-linked financial instruments will likely determine how investors adapt to these changes.
Gold industry insiders believe the government’s decision could reshape investment trends in the sector. With fewer monetization options available, many investors might shift towards physical gold holdings or alternative investment avenues like exchange-traded funds (ETFs) and gold mutual funds. Experts argue that while digital gold options have gained popularity, they may not fully replace the structured benefits of schemes like GMS, especially for those who preferred long-term security over market fluctuations.
The government’s move also raises questions about its broader strategy for gold management. India, one of the largest gold consumers in the world, has long sought to reduce its dependence on gold imports. The GMS was designed to bring idle gold into the financial system, reducing import demand. Its discontinuation now places greater emphasis on sovereign gold bonds (SGBs) and other structured investment schemes. However, with SGB issuances also slowing down, the government may need to explore new methods to manage gold’s economic impact.
Meanwhile, banking institutions that facilitated GMS deposits are now adjusting to the policy shift. Some banks had actively promoted the scheme, offering various incentives to attract depositors. With the sudden withdrawal of medium- and long-term deposits, these banks may need to redirect customers toward alternative gold-related financial products.
For small investors and households that participated in GMS, the government’s decision has sparked uncertainty. Many who viewed the scheme as a safe way to earn returns on their gold are now left reassessing their financial plans. Some depositors may consider withdrawing their existing deposits upon maturity, while others may look for alternative gold investment options that align with their financial goals.
Looking ahead, market watchers expect further announcements from the Finance Ministry regarding gold-related policies. If gold prices continue to rise, the government may introduce new incentives or investment schemes to address concerns arising from the GMS withdrawal. In the short term, however, the discontinuation of key deposit categories under GMS marks a significant policy shift in India’s approach to gold monetization.