Why it makes sense to deposit physical gold in government’s Gold Monetization Scheme

One of the major challenges that investors in physical gold face is safe storage. A common practice is to store the yellow metal in bank lockers for its safety. But are they really safe? Though the Deposit Insurance and Credit Guarantee Corporation (DICGC) provides a cover of up to ₹1 lakh for your bank deposits, there is no insurance for the contents kept in a bank locker.

One way to ensure the safety of your physical gold is depositing it under the government’s Gold Monetisation Scheme, which also gives a return on the deposits. But, ideally, you should submit gold that you don’t want to use in its current form.

How to subscribe

The scheme was introduced in 2015 to mobilize idle gold lying with households and putting it to productive use.

To register for the scheme, you are required to get your holdings evaluated by an authorized Purity Testing Centre (PTC), which can issue a certificate indicating the value of gold. You can deposit your gold at the same centre (Find a list of specified collection centres).

You then have to show the certificate issued by PTC at a designated bank branch, where you will need to open a savings account if you already don’t have one. The bank will open a deposit account equal to the value of gold mentioned in the certificate, and will credit the interest rate you earn on your deposits in the savings account.

Main features

You can deposit gold for the short term (one to three years), medium term (five to seven years) or long term (12 to 15 years). The interest rate you earn on your deposit depends on the tenure. You will earn 0.50% per annum over a one-year tenure; 0.55% per year for a tenure above one year and up to two years; and 0.60% per year for a tenure above two years and up to three years. In case of medium- and long-term deposits, you can earn up to 2.25% per annum.

If you receive the payment annually, you will get a simple interest (as on 31 March) on your deposits. If you receive it on maturity, the interest rate will be cumulative (compounding annually). You need to choose the mode of payment at the time of deposit.

Note that you can withdraw the physical gold you deposited only if you are investing for the short term, wherein you have the option of withdrawing gold or its value in rupees at the prevailing prices. In case of medium- and long-term deposit, you will be paid only in the form of rupees at prevailing prices, and cannot withdraw your physical gold.

The minimum gold deposit you can make is 30 grams in the form of raw gold—bars, coins and jewellery, excluding stones and other metals. However, remember that even if you take back physical gold, it will not come to you in the form in which you deposited it. Banks return your gold only in the form of coins or bars.