Gold Monetisation Scheme (GMS)

Almost every Indian household has some gold jewellery sitting around collecting dust. People also tend to invest their surplus in gold coins or gold jewellery.

However, there is an additional cost to all of this: the cost of storage and the danger that comes with it. In this article, we’ll show you how to use the gold in your home to make extra money without spending more money.

In this post, we’ll show you how to use the Gold Monetisation Scheme to generate extra money from your gold without selling it.

What is Gold Monetisation Scheme?

The Gold Monetisation Scheme (GMS) is a government-sponsored programme that allows homeowners to profit from the real gold in their houses. The Gold Monetisation Scheme requires an individual to deposit actual gold with the government, and the government will pay you interest on top of the price appreciation.

You can deposit a minimum of 30 grammes of gold (in the form of bars, coins, or jewellery) at the Collection and Purity Testing Centre, which is a government-approved facility (CPTC).

This centre will test the purity of your gold and issue you a certificate certifying the amount of gold you have placed. After that, you can take this certificate to a bank and open an account for it.

This account will represent the amount of gold you have in your bank account, on which you will earn interest of up to 2.5% per year, as well as the capital appreciation of gold due to price changes. This interest is denominated in gold.

For example, if you own 100 grammes of gold jewellery, you can present it to the government. The government will examine its purity and issue you a certificate stating that you have deposited 100 grammes of gold with them. This 100 gm gold certificate can be redeemed at any time, and you will receive the gold value at the moment of the sale in the future. As a result, you will gain from price appreciation.

You would gain interest in this in addition to the price appreciation. When interest is credited to your account, it is credited in gold terms; for example, if the interest rate is 2.5%, the total amount in your bank account becomes 100+2.5=102.5 gms of gold.

The deposit has a minimum of one year and a maximum of fifteen years. Short-term deposits range from one to three years, medium-term deposits range from five to seven years, and long-term deposits range from twelve to fifteen years. Even though the minimum deposit period is one year, consumers can withdraw their funds early for a modest fee.

The bank sets the short-term interest rate, which is 2.25% per annum, while the medium and long-term rates are 2.50% per annum. This interest will be credited to your account on the due date, and you can withdraw it at any time or maturity.

You can either redeem your deposit for actual physical gold in the form of pure gold bars or coins, or you can redeem it for money equal to the value of gold on the maturity or withdrawal date. The option, however, must be chosen at the time of deposit and cannot be modified later. In the event of an early withdrawal, the bank has the option of redeeming in cash or gold.

Final Thoughts

Gold Monetisation Scheme, in our opinion, is ideal for anyone who wants to supplement their income by selling gold that they already own in the form of jewellery or coins. Even small investors can participate because the minimum investment requirement is relatively modest.

People who don’t want to trade their gold for cash will appreciate the option of receiving either gold or cash at maturity. The cash alternative is also advantageous for people who want to avoid paying taxes on gold transactions.