As the government sharpens its focus on reducing gold imports to contain the current account deficit, attention is once again turning to India's Gold Monetisation Scheme (GMS) as a possible long-term alternative to physical gold purchases.
The Centre recently raised effective gold import duty from 6% to 15%, including 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess. Prime Minister Narendra Modi also appealed to citizens to defer gold purchases for a year amid rising import pressures.
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Experts believe the real solution lies beyond temporary duty hikes. “A more durable solution to managing the current account impact of precious metal imports lies in improving domestic gold monetisation schemes and developing liquid gold-backed financial products,” said Sawrikar, adding that higher duties may only offer short-term relief.
India is estimated to hold over 25,000 tonnes of gold in households, while annual imports exceed 700 tonnes. Policymakers see monetising idle domestic gold as one way to reduce dependence on imports.
The Reserve Bank of India's Gold Monetisation Scheme, launched in 2015, allows individuals to deposit gold jewellery, bars, or coins with designated banks for a fixed tenure and earn interest on the deposit. At maturity, depositors can opt for either cash equivalent or physical gold.
However, there is a key caveat — the original jewellery is not returned. The deposited ornaments are melted and converted into gold bars after purity testing, while embedded stones or studs are removed and handed back separately.
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Currently, only the Short Term Bank Deposit component of the scheme — with tenures ranging from one to three years — remains operational after the government discontinued medium and long-term variants in March 2025.
The process involves opening a zero-balance gold deposit account, completing KYC formalities, and submitting gold at authorised Collection and Purity Testing Centres (CPTCs).
Depositors are advised to check purity deductions, interest payout structure, premature withdrawal conditions, and redemption terms before participating.
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