India has discontinued the Medium and Long-Term Gold Monetisation Scheme (GMS), a move that could impact gold investors and depositors across the country. The Finance Ministry announced that the decision would take effect immediately, citing operational challenges and a lack of significant participation as key reasons.
The GMS was introduced in 2015 to reduce gold imports by encouraging people to deposit their idle gold with banks. In return, depositors earned interest while the government could use the gold for economic purposes. However, the scheme struggled to gain traction despite various modifications.
With gold prices at record highs, the discontinuation of these long-term gold deposit options raises concerns for those who sought a secure investment backed by interest earnings. Under the change, only the Short-Term Gold Deposit Scheme will continue, offering a flexible alternative for those looking to park their gold for a limited period.
Experts believe that the discontinuation of the scheme could lead to increased household gold hoarding, potentially affecting the government’s efforts to manage gold demand. Meanwhile, banks handling existing gold deposits will be required to return the gold or equivalent value to depositors as per the original terms of their agreements.
The move comes amid rising global gold prices, driven by economic uncertainty and inflation concerns. Investors are now expected to explore alternative avenues such as sovereign gold bonds and exchange-traded funds (ETFs) to secure returns on their holdings.
While the government’s decision to scrap the scheme marks a shift in gold management policy, its long-term impact on India’s gold market remains to be seen.
