Gold Kept at Home Will Earn Money: Understand the Complete Mechanics of the Gold Monetization Scheme..

To curb the rising demand for gold and control the country's growing Current Account Deficit, the government has increased the import duty on gold. The effective import duty on gold has now been raised from 6% to 15%. This comprises a 10% Basic Customs Duty and a 5% Agriculture Infrastructure and Development Cess. A few days ago, Prime Minister Narendra Modi also appealed to the public to defer gold purchases for a period of one year. In light of this, the question arises: what could be an alternative option for investing in or utilizing gold? Amidst this scenario, the Gold Monetisation Scheme (GMS) has once again come into the spotlight.

**What is the Gold Monetisation Scheme?**

Under the Gold Monetisation Scheme, any Indian citizen can deposit gold—such as jewelry, gold coins, or bars—currently kept in their homes or bank lockers with a bank for a fixed tenure. In exchange, the bank pays interest on that gold. Upon maturity, the customer has the option to either receive the monetary value of the gold based on prevailing market rates or reclaim the physical gold. The objective of this scheme is to mobilize idle gold lying in households, institutions, and temples, and to reduce the country's reliance on gold imports.

**Keep This Important Point in Mind**

The most significant condition of this scheme is that the *same* jewelry deposited is not returned to the customer. The bank melts down the jewelry and converts it into gold bars. If the jewelry contains gemstones or precious stones, these are removed and returned to the customer before melting. Furthermore, during the purity testing process, if the gold is found to contain impurities, the credited quantity of gold may be adjusted downwards accordingly.

**How Does the Process Work?**

First, one must open a 'Zero Balance Gold Deposit Account' at an authorized bank by completing the necessary KYC (Know Your Customer) formalities. Subsequently, the gold is deposited at a designated 'Collection and Purity Testing Centre' (CPTC) listed by the bank. At the center, the gold undergoes purity testing, and its value is determined based on a fineness standard of 995. The bank credits the monetary value of the gold to the account within approximately 30 days and issues a Deposit Certificate.

**Which Scheme is Currently Operational?**

The government has discontinued the Medium-Term and Long-Term schemes under the GMS, effective March 2025. Currently, only the Short-Term Bank Deposit scheme is available, which has a tenure of 1 to 3 years.

What should you check before depositing gold?
Before depositing gold, ensure you fully understand the method of interest payment. Some banks pay interest annually, while others pay it only upon maturity. Additionally, you should clarify in advance whether a facility for premature withdrawal is available, and whether the payout at maturity will be made in gold or in cash.

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