Gold Monetisation Scheme (GMS): Reducing Gold Imports and Current Account Deficit in India

12 May 2026

Industry bodies have urged the Union Government to strengthen the Gold Monetisation Scheme to reduce India’s rising dependence on gold imports.

Key Concerns regarding Gold Market

Rising Gold Imports: India remains one of the world’s largest gold importers, importing nearly 700–900 tonnes annually, thereby widening the Current Account Deficit (CAD).
Pressure on Foreign Exchange: High gold imports increase demand for foreign currency and exert pressure on India’s forex reserves and rupee stability.
Idle Household Gold: Indian households and temples are estimated to possess over 25,000 tonnes of idle gold, most of which remains outside the formal financial system.
Informal and Unregulated Trade: High customs duties and price differentials encourage gold smuggling, as seen in repeated seizures along coastal and border regions.

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About Current Account Deficit (CAD) (UPSC CSE Pre 2017)

Current Account Deficit (CAD) occurs when a country’s total imports of goods, services, and transfers exceed its total exports over a specific period.
Components of Current Account
- Merchandise Trade: It includes exports and imports of physical goods such as petroleum, machinery, electronics, and agricultural products.
- Services Trade: It covers earnings and payments from services like IT, banking, tourism, shipping, and insurance.
- Income Account: It includes interest, dividends, profits, and wages earned from overseas investments and employment.
- Current Transfers: It consists of one-way transfers such as remittances, gifts, grants, and foreign aid without any exchange of goods or services.
A high CAD increases dependence on foreign capital inflows and may exert pressure on exchange rates and forex reserves.

About Gold Monetisation Scheme (GMS) ( UPSC CSE Pre 2016)

The Gold Monetisation Scheme allows individuals and institutions to deposit idle gold with banks and earn interest on it.
Objective: To mobilise unused gold and reduce dependence on imports.
Launched In: 2015 by the Ministry of Finance.
Key Features of GMS
- Gold Deposit Facility: Individuals, trusts, and institutions can deposit raw gold, jewellery, or bullion after purity testing.
- Interest Earnings: Depositors receive interest on deposited gold, making idle assets financially productive.
- Deposit Tenure Options: The scheme provides Short-Term, Medium-Term, and Long-Term deposit options with varying maturity periods.
  - As of March 26, 2025 GMS has been restricted to Short-Term Bank Deposits (STBD) of 1-3 years, with Medium/Long-Term Government Deposits (5-15 years) discontinued.
  - The scheme allows individuals and institutions to deposit gold (minimum 10g) in raw form to earn interest, with returns generally paid in INR based on the gold price.
- Purity Verification: Gold is tested and certified at Collection and Purity Testing Centres before acceptance.
- Redemption Choice: Depositors can receive maturity value either in gold or equivalent cash, depending on scheme conditions.

Significance of GMS in Current Scenario

Reducing Import Dependence: Mobilising domestic idle gold can reduce excessive gold imports and improve the trade balance.
Strengthening Financial Savings: The scheme encourages households to shift from physical gold hoarding towards formal financial participation.
Supporting Forex Stability: Lower gold imports reduce pressure on foreign exchange reserves and help stabilise the rupee.
Formalisation of Gold Economy: GMS promotes transparency, organised gold recycling, and integration of gold assets into the banking system.

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Conclusion

An effectively implemented Gold Monetisation Scheme can transform idle gold into a productive financial asset while strengthening India’s macroeconomic stability.

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