Gold Monetisation Scheme (GMS) was lauded by Indian investors for its unique purpose to bring out the lying gold holdings of investors and institutions households towards using it more productively. The government aimed to bring the idle gold reserves from private holding towards bringing them into the financial domain.

The scheme allows depositors to earn by depositing their idle gold, gold coins, gold bars, and jewellery with the banks. The Reserve Bank of India (RBI) made few amendments in April 2021. Below are some of the important points investors should understand before investing in GMS:

• An investor can invest in the short term (1-3 years), medium (5-7 years), and long term. Usually, the deposits are accepted by the banks on behalf of the central government.

• Category-wise resident Indians including retail investors, HUF, Trusts, and Fund Household can deposit under GMS.

• As a depositor, they need to hold savings/current accounts with the respective bank before opening a gold deposit account for earning interest on their gold in Indian Rupee. The depositor would also have to comply with the Know Your Clients (KYC).

• The interest rates are decided by the central government and are advised to banks by RBI. The investors can earn up to 2.25 per cent annum in the case of medium and long-term deposits. The interest in respect of short-term bank deposit will be denominated and paid in Indian rupee only.

• As per the recent amendment by RBI, the redemption of principal at maturity will be at the option of the depositor and can be either in Indian Rupee equivalent of the deposited gold based on the prevailing price of gold at the time of redemption or in gold. The option in this regard shall be obtained in writing from the depositor at the time of making the deposit and would be irrevocable. The premature redemption will also be in the Indian rupee equivalent of gold at the discretion of the designated banks.

• The banks play a very crucial role as the customers' deposit based on trust and confidence to deal with the outcome for many years. Investors should be aware of what they are getting into and which bank they are selecting for GMS.