Complete Guide on How to Check Gold Purity Before Buying Jewellery
July 20, 2026 | 4 mins read
Quick Overview
- The Gold Monetisation Scheme (GMS) allows individuals and institutions to earn interest on idle gold.
- Deposited gold is tested, collected, and converted into standard gold after acceptance.
- Investors can earn returns through the gold monetisation scheme interest rate offered by participating banks.
- The scheme helps reduce the cost and risks associated with storing physical gold.
- Depositors may enjoy certain tax benefits under applicable regulations.
- Multiple tenure options are available, including short, medium, and long-term deposits.
- Gold can be redeemed in cash or gold, depending on the deposit type and prevailing guidelines.
Summary
The gold monetisation scheme lets resident Indians deposit physical gold with designated banks and earn interest on it. Launched by the Government of India in 2015, it targets India’s estimated 24,000+ tons of idle household gold.
What is the Gold Monetisation Scheme?
The gold monetisation scheme was introduced by the Government of India to mobilise the vast quantities of idle gold held by households, trusts, and institutions. Under the scheme, eligible gold is deposited with authorised collection centres and banks, allowing depositors to earn interest while contributing to the country's gold economy.
The scheme transformed traditional gold ownership by enabling investors to earn returns rather than simply holding gold as a passive asset.
Objectives of the Gold Monetisation Scheme
The primary objectives include:
- Mobilising idle gold held by households and institutions.
- Reducing India's dependence on imported gold.
- Providing investors with an opportunity to earn returns on unused gold.
- Strengthening the formal financial ecosystem.
- Enhancing liquidity in the domestic gold market.
Why Was the Scheme Introduced?
India is one of the world's largest consumers of gold. However, a significant portion of this gold remains unused in homes and lockers. The gold monetisation scheme was introduced to channel this idle asset into productive economic use while providing financial benefits to depositors.
Key Features of the Gold Monetisation Scheme
Interest on Gold Deposits
One of the most attractive features of the scheme is that depositors can earn interest on gold holdings. The interest rate on gold monetisation scheme deposits varies depending on the tenure and the participating bank.
Flexible Deposit Tenures
The scheme offers multiple tenure options catering to different investment horizons and financial goals.
Redemption Options
At maturity, investors may receive redemption in gold or cash, depending on the type of deposit and prevailing scheme guidelines.
Government-Backed Initiative
The scheme operates under government guidelines, providing an additional layer of credibility and trust for participants.
Benefits of the Gold Monetisation Scheme
| Benefit | Description |
|---|---|
Earn Returns on Idle Gold | Instead of keeping jewellery, bars, or coins dormant, investors can generate income through the gold monetisation scheme, with an interest rate applicable to their deposits. |
| Reduce Storage and Locker Costs | Depositing gold under the scheme eliminates the need for expensive locker facilities and reduces storage-related concerns. |
| Potential Tax Benefits | Certain tax exemptions may be available on interest earned and capital gains arising from deposits under the scheme, subject to prevailing tax laws. |
| Contribution to the Formal Economy | The scheme helps bring idle gold into the formal economy, reducing dependence on imported gold and supporting economic efficiency. |
| Enhanced Security for Gold Holdings | Depositing gold under the scheme reduces the risks associated with storing valuable assets at home, such as theft, loss, or damage. |
| No Need for Active Management | Once the gold is deposited, investors can earn returns without having to monitor market fluctuations or manage physical storage arrangements. |
| Supports National Gold Reserves and Resource Utilisation | By mobilising idle gold, the scheme helps improve the utilisation of existing gold resources within the country and reduces the need for additional gold imports. |
How the Gold Monetisation Scheme Works
Deposit Acceptance and Purity Testing
The process begins with gold being submitted at an authorised Collection and Purity Testing Centre (CPTC). The gold undergoes purity verification before acceptance.
Gold Conversion After Collection
After acceptance, the deposited gold is melted and converted into standard gold bars. This ensures uniformity and facilitates further utilisation within the system.
Interest Accrual and Maturity
Once the deposit is accepted, interest begins accruing according to the applicable gold monetisation scheme interest rate and tenure selected.
Redemption in Gold or Cash
Upon maturity, investors may receive the equivalent value in gold or cash based on the deposit category and applicable regulations.
Step-by-Step Process to Open a Gold Monetisation Scheme Account
Locate an Authorised Collection and Purity Testing Centre
Identify a recognised CPTC authorised to process gold deposits under the scheme.
Gold Assessment and Certification
The deposited gold is assessed for purity and weight. A certificate is issued after successful testing.
Opening a Gold Deposit Account
The depositor opens a Gold Deposit Account with a participating bank using the certification provided.
Deposit Confirmation and Interest Earnings
After completion of formalities, the deposit is activated, and interest begins accruing.
Maturity and Redemption Process
At maturity, the depositor can claim redemption according to the selected deposit terms.
Who Can Apply and What Gold Qualifies
Eligible Individuals and Hindu Undivided Families
Resident individuals and Hindu Undivided Families (HUFs) are eligible to participate in the scheme.
Trusts, Mutual Funds and Institutions
Trusts, mutual funds, charitable organisations, and other eligible institutions can also invest under the scheme.
Jewellery, Coins and Bars
Gold jewellery, bars, and coins are generally accepted, subject to purity standards and scheme requirements.
Minimum Deposit Requirement
Historically, the minimum deposit requirement under the scheme has been 10 grams of gold, although investors should verify current eligibility norms before applying.
Gold Monetisation Scheme Interest Rate Explained
How Banks Determine Interest Rates
The gold monetisation scheme interest rate may vary depending on:
- Deposit tenure
- Government guidelines
- Market conditions
- Participating bank policies
Factors Affecting Gold Monetisation Scheme Returns
Returns may depend on:
- Gold quantity deposited
- Applicable interest rate
- Deposit duration
- Redemption method
Return Potential Compared with Holding Physical Gold
Unlike physical gold stored at home or in lockers, GMS deposits provide an opportunity to earn interest while retaining exposure to gold value.
Deposit Options and Tenure Choices
Short-Term Bank Deposits
Short-term deposits are generally offered by banks and may range from one to three years, depending on prevailing guidelines.
Medium-Term Deposits
Medium-term deposits are designed for investors seeking longer investment horizons and potentially higher returns.
Long-Term Deposits
Long-term deposits cater to investors looking to maximise the benefits of long-duration gold investments.
Recent Changes in Scheme Availability
The availability and structure of various deposit tenures may evolve over time. Investors should verify the latest scheme details with participating banks.
Gold Monetisation Scheme Calculator Basics
Inputs Required to Estimate Returns
A gold monetisation scheme calculator typically requires: The quantity of gold deposited.
- Purity level
- Applicable interest rate
- Deposit tenure
Example Return Calculation
For example, if an investor deposits 100 grams of gold for a specific tenure, the gold monetisation scheme calculator can estimate the maturity value based on the applicable interest rate and tenure.
Factors That Influence Final Returns
Factors affecting returns include:
- Gold quantity
- Deposit duration
- Applicable interest rate
- Market value of gold at redemption
Tax Implications of the Gold Monetisation Scheme
Tax Benefits Available Under the Scheme
Certain tax exemptions may apply to interest income and appreciation in value under the scheme, subject to prevailing regulations.
Capital Gains Considerations
Capital gains tax treatment depends on applicable tax provisions and any amendments introduced by the government.
Documentation and Compliance Requirements
Investors should maintain proper documentation, including deposit certificates and account records, for compliance purposes.
Risks and Limitations of the Gold Monetisation Scheme
Loss of Jewellery Sentimental Value
Jewellery deposited under the scheme is melted after acceptance, making it unsuitable for heirloom or sentimental pieces.
Gold Melting and Conversion Process
Depositors must understand that the original jewellery cannot be returned after processing.
Interest Rate Variability
The interest rate on gold monetisation scheme deposits may vary across institutions and tenure options.
Liquidity Considerations
Premature withdrawal may be subject to restrictions, penalties, or revised terms depending on the deposit category.
Gold Monetisation Scheme vs Other Gold Investment Options
| Comparison | Gold Monetisation Scheme (GMS) | Alternative Option |
|---|---|---|
| GMS vs Sovereign Gold Bonds (SGBs) | The gold monetisation scheme allows investors to deposit existing physical gold, such as jewellery, coins, or bars and earn interest on it. It is suitable for individuals who already own gold and want to generate returns from otherwise idle assets. | Sovereign Gold Bonds (SGBs) are government securities linked to the market price of gold. Investors purchase bonds instead of holding physical gold. SGBs provide interest income and potential price appreciation but do not require ownership of physical gold. |
| GMS vs Gold ETFs | Under GMS, investors deposit physical gold and earn returns through the applicable gold monetisation scheme interest rate. The scheme is designed to make existing gold holdings productive. | Gold Exchange Traded Funds (ETFs) are market-traded investment instruments that track gold prices. They offer liquidity and ease of trading through stock exchanges, but do not generate interest on physical gold already owned by investors. |
| GMS vs Digital Gold | GMS is focused on monetising gold that investors already possess. By depositing eligible gold, investors can potentially earn interest while reducing storage concerns. | Digital Gold allows investors to buy, sell, and hold gold online in small quantities. It offers convenience and accessibility, but does not provide a mechanism to earn returns on physical gold that is already owned. |
| GMS vs Gold Loans | The gold monetisation scheme is an investment-oriented option where gold is deposited for a specific tenure to earn returns. It is suitable for investors who do not need immediate liquidity and want to generate income from idle gold. | Gold Loans are borrowing products where gold is pledged as collateral to obtain funds. They provide quick access to liquidity but involve repayment obligations and interest costs for the borrower. |
| GMS vs Keeping Gold in a Locker | GMS transforms idle gold into a potentially income-generating asset while reducing the need for physical storage. Depositors can benefit from interest earnings and reduced storage responsibilities. | Keeping gold in a bank locker or home safe preserves ownership and accessibility of physical gold but usually involves storage costs and does not generate any returns or income. |
| GMS vs Physical Gold Investment | GMS helps investors earn returns on gold that is already owned and lying unused. It also supports the formal economy by bringing idle gold into productive use. | Holding physical gold directly allows investors to retain possession and sentimental value, particularly in the case of jewellery, but it does not provide periodic income and may involve storage and security expenses. |
| GMS vs Fixed Deposits | Returns under the gold monetisation scheme are linked to deposited gold and applicable interest rates. It is specifically designed for investors with existing gold assets. | Fixed Deposits (FDs) require a cash investment rather than gold. They provide predictable returns and capital protection but do not help investors generate income from their physical gold holdings. |
When to Consult a Financial or Tax Professional
Investors should seek professional advice when:
- Evaluating tax implications.
- Comparing gold investment alternatives.
- Assessing redemption options.
- Understanding long-term financial planning objectives.
Conclusion
The gold monetisation scheme offers a unique opportunity to convert idle gold into an income-generating asset while supporting the broader economy. With flexible tenures, potential tax advantages, and the ability to earn returns through the gold monetisation scheme interest rate, it can be a suitable option for individuals and institutions holding unused gold.
Before investing, review the latest scheme guidelines and consult a financial advisor if necessary. For managing your financial products conveniently, the PLANET App by L&T Finance provides a seamless digital experience for loan servicing, account management, statements, EMI payments, and other financial services.
FAQs
What happens to gemstones in jewellery deposits?
Gemstones are generally removed before the gold assessment process and are returned to the depositor.
Can I get back the same jewellery I deposited?
No. Deposited jewellery is melted and converted into standard gold after acceptance.
Is the Gold Monetisation Scheme safe for family gold?
The scheme is government-backed and follows established procedures, making it a structured option for eligible gold deposits.
Which banks offer the Gold Monetisation Scheme in India?
Several authorised banks have participated in the scheme. Availability may vary, so investors should check current participating institutions.
Can a nominee claim a gold deposit after the depositor's death?
Yes, nomination facilities are generally available, allowing nominees to claim the deposit according to applicable procedures.
How long does purity testing and deposit processing take?
The timeline may vary depending on the testing centre and bank, but the process typically includes purity verification, certification, and account activation.
What is the minimum gold deposit under the Gold Monetisation Scheme?
The minimum deposit requirement has historically been 10 grams of gold, subject to prevailing guidelines.
Can I prematurely withdraw my gold deposit?
Premature withdrawal may be permitted under certain conditions, depending on the deposit category and applicable rules.
How is interest calculated under the Gold Monetisation Scheme?
Interest is calculated based on the quantity of gold deposited, tenure selected, and the applicable gold monetisation scheme interest rate offered under the deposit scheme.
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