The Indian government has decided to discontinue the Gold Monetisation Scheme (GMS) due to improving market conditions. The Ministry of Finance announced this decision on Tuesday, stating that while the scheme will no longer accept new deposits under its medium-term component, banks may continue short-term gold deposits at their discretion.

Background of the Scheme

The Gold Monetisation Scheme was launched on September 15, 2015, with the objective of reducing India's dependence on gold imports and mobilizing gold held by households and institutions for productive use. Over the years, the scheme had mobilized approximately 31,164 kg of gold by November 2024. This included:

• 7,509 kg under short-term deposits (1-3 years)
• 9,728 kg under medium-term deposits (5-7 years)
• 13,926 kg under long-term deposits (12-15 years)

A total of 5,693 depositors participated in the scheme.

Why Was the Scheme Discontinued?

The sharp rise in gold prices has been a key factor in the discontinuation of the scheme. Gold prices have surged by ₹26,530 per 10 grams (41.5%), rising from ₹63,920 on January 1, 2024, to ₹90,450 per 10 grams as of March 25, 2025. The government believes that the economic conditions and gold investment trends no longer necessitate the continuation of the scheme.

What Happens Next?

• Short-Term Bank Deposits (STBD): Banks can continue offering STBD (1-3 years) based on commercial viability. The Reserve Bank of India (RBI) will issue detailed guidelines for banks regarding the continuation of these deposits.
• Medium-Term Government Deposits (MTGD) and Long-Term Government Deposits (LTGD): No new deposits will be accepted under the medium-term (5-7 years) and long-term (12-15 years) components of the scheme from March 26, 2025. However, existing deposits will remain active until their maturity period under the existing GMS guidelines.

Key Takeaways

• The Gold Monetisation Scheme has been discontinued, except for short-term bank deposits at the discretion of banks.
• Gold prices have surged by 41.5% over the past year, influencing the government’s decision.
• No new medium-term and long-term gold deposits will be accepted from March 26, 2025.
• Existing deposits will remain valid and will mature as per the scheme’s guidelines.

The move signals a shift in the government's approach toward gold investment, with market conditions playing a significant role in shaping future policies. Depositors are advised to contact their respective banks for further details regarding their existing gold deposits.