The Ministry cited evolving market conditions and performance of the scheme while announcing the discontinuation.
After sovereign gold bonds, the Centre has drawn the curtains on another gold-related scheme — the Gold Monetisation Scheme (GMS) — amid a spike in gold prices. The Ministry of Finance in a release issued late on Tuesday said that it will discontinue medium- and long-term deposits under the Gold Monetisation Scheme from March 26.
The Ministry cited evolving market conditions and performance of the scheme while announcing the discontinuation. However, short-term bank deposits, which are under the ambit of banks in the scheme, will continue at the discretion of individual banks based on the commercial viability as assessed by them, the Ministry said.
What is Gold Monetisation Scheme?
The Gold Monetisation Scheme was launched in November 2015 to make idle gold productive> It let consumers to either sell their gold or store it with banks, so it could merge into the formal economy and reduce the country’s gold imports and thus, reduce the current account deficit. Idle gold held by households, trusts and various institutions in India was deposited under this scheme. GMS was a revamped version of an older Gold Deposit Scheme.
It consisted of three components: (1) Short-term bank deposit (1-3 years); (2) Medium-term government deposit (5-7 years); and (3) Long-term government deposit (12-15 years). The minimum deposit allowed was 10 gm of raw gold (bars, coins, jewellery excluding stones and other metals). There was no maximum limit for deposit under the scheme.
Gold monetisation interest rate offered
The amount of interest rate payable for short-term deposits under the Gold Monetisation Scheme is decided by the banks on the basis of the prevailing international lease rates, other costs, market conditions, etc., and is borne by the banks. For medium- and long-term deposits, the rate of interest was decided by the government, in consultation with the RBI and borne by the Central government. Gold Monetisation Scheme interest rate was fixed at 2.25 per cent for medium-term bonds and at 2.5 per cent for the long-term bonds.
