HomeGENERALPros And Cons Of The Gold Monetization Scheme

Pros And Cons Of The Gold Monetization Scheme

The gold monetisation schemes, also known as the Gold Monetisation Scheme (GMS) or the Sovereign Gold Bond (SGB), is a government-run scheme that allows you to invest in gold. It is meant for those who wish to earn interest on the gold they already own. These schemes are not as popular yet in India, due to lack of awareness among consumers and also because most Indians do not prefer selling their gold, even if it is lying idle in the locker. Instead the common thing to do is keep track of things like today’s gold rate in ap 22 carat to ensure the price of your gold is appreciating. So let’s take a quick look at its pros and cons to understand if it is a good scheme for your gold or not

Also Read: Digitalization Of The Company In 2022


  1. Help in reducing the import of the yellow metal. The major objective of this scheme was to cut down on gold imports which have been at their peak for quite some time now causing a huge dent in the country’s economy and foreign reserves. This would help reduce the trade deficit as well as avoid the smuggling of gold into India as we Indians are known for our love for jewellery and gold ornaments.
  2. People who have gold as an asset but are struggling for liquidity can opt for this scheme and earn good interest on their deposits. Banks will give them options to withdraw money from their deposit accounts as and when they want to. So you don’t need to constantly monitor Gujarat or Maharashtra gold rate for the right price. You can checkout Khatabook to learn the process in detail.
  3. This scheme was introduced to encourage citizens to invest their gold which is lying idle in their lockers and earn interest against it rather than keeping it as a family treasure or a precious gift from ancestors.
  4. Once deposited, gold will be melted and impurity-free 24-carat gold will be formed which is more convenient, easier to store and transport compared to ornaments, bars etc.
  5. The biggest advantage is that it would bring transparency to the system which is currently not there regarding physical gold in India. A gold monetization scheme will help in controlling black money as well as aid economic growth at large due to an increase in financial inclusion of individuals holding gold with them.
  6. There is no risk associated with this scheme as you invest less than Rs 3 lakhs and there is a waiver of income tax on the interest earned from this investment.
  7. Inflation is a common phenomenon that terrifies us every time the budget is announced. The rate of inflation has been increasing steadily. In such times, if the gold deposited earns a decent interest rate annually, it will at least nullify the increase in inflation rate and save our money from getting devalued.


  1. The interest rate is not very attractive compared to other modes of investment. The rate is hardly 1-2%. It will not match the inflation in the prices of commodities.
  2. There is no guarantee for the original gold to be deposited back as the same gold might be lent to others and then replaced with new gold during redemption.
  3. One of the biggest challenges that such schemes face is that it takes out the optionality customers have when they sell their gold assets (when they need funds). In other words, they can no longer get money immediately when they need funds and rather have to wait for long periods to realize the same value.
  4. If one has gold sovereign bonds, then there is no need for the same to be deposited under this scheme as they are already earning interest on the same.

Also Read: Why Is Geolocation Marketing Beneficial For Businesses?

Latest Articles