Gold Monetisation Scheme Ended: Gold ETF SIPs Instead

Grandmother's eighty grams of bangles have sat in a locker for thirty years — insured, polished twice, earning nothing. For a decade the government's answer to exactly this pile was the Gold Monetisation Scheme: deposit the metal, earn interest, get gold value back. That answer is gone. The scheme's medium and long-term deposit arms were discontinued with effect from March 26, 2025, and this post covers what the scheme was, what happens to deposits already running, and how the modern replacement — a disciplined SIP into gold ETFs or gold funds — does the job the scheme never quite could.

The full gold decision tree — physical, digital gold, SGBs, ETFs — lives in our how-to-invest-in-gold guide and the four-way comparison; this page is the GMS story plus the SIP mechanics.

What the Gold Monetisation Scheme was

Launched in November 2015 under the broader Gold Monetisation framework, GMS let individuals and institutions deposit idle gold with designated banks. The metal was tested for purity (minimum 10 grams, 995 fineness — bars, coins or jewellery excluding stones), melted into bullion at refiners, and credited as a deposit that paid 2.25% for the 5-7 year medium-term arm and 2.5% for the 12-15 year long-term arm, with the interest exempt from income tax and the deposit's redemption back in rupees at the prevailing gold price (Source: Gold Monetisation Scheme notifications; PIB releases on GMS). The design idea was genuinely clever: put India's estimated 25,000-plus tonnes of household and temple gold to work instead of importing more.

The idea met reality. Households would not melt jewellery with sentimental weight; temple gold moved slower than hoped; and rising gold prices made the government's 2.5% interest obligation — payable in gold-equivalent value at redemption — an increasingly expensive liability. The Sovereign Gold Bond program, GMS's cousin, hit the same wall: the last SGB tranche was issued in February 2024 and the February 2025 Budget confirmed SGB's discontinuation for fresh issuance (Source: Union Budget 2025-26; our SGB post tracks the details).

What exactly ended on March 26, 2025

The Government of India's decision, conveyed through its press release of March 25, 2025 (PIB release ID 2115009): the Medium Term Government Deposit (5-7 years) and Long Term Government Deposit (12-15 years) components of the Gold Monetisation Scheme stand discontinued with effect from March 26, 2025, based on evolving market conditions. Source: Government of India press release, PIB, March 25, 2025; corroborated by bank customer notices.

Three consequences, precisely bounded. One: banks no longer accept fresh GMS deposits — the doorstep gold-collection apparatus is winding down with existing commitments. Two: deposits already booked continue on their original terms to maturity — interest, tax treatment and redemption rights survive; the discontinuation ended new entries, not existing contracts. Three: there is no successor deposit scheme as of November 2026 — the government's gold-linked retail products are now limited to secondary-market SGB trading and the market-driven ETF and fund routes.

For anyone whose family gold is still sitting in a locker, the practical question changed shape: the state no longer offers to monetise it for you, so the options are the private ones — pledge it (our gold loan guide covers rates and mechanics), sell it (our physical gold buying guide covers purity, invoicing and buy-back realities), or leave it and build gold exposure the modern way: paper gold, by SIP.

The modern replacement: gold ETFs and gold funds, by SIP

A gold ETF holds 99.5%-pure physical gold in a custodian's vault and lists units on the stock exchange; a gold mutual fund is a fund-of-funds that buys the ETF for you, so you never touch a demat account and can run SIPs from ₹500 (Source: our gold ETF versus gold mutual fund post, which works the wrapper differences and TER stacking). The category has become the default paper-gold route: gold ETF assets stood at ₹1.86 lakh crore across 26 schemes as of September 30, 2026, with inflows still pouring in — ₹2,596.70 crore in August 2026 alone, the third straight month of growth (Source: AMFI monthly data as reported, September-October 2026).

The SIP mechanics, wrapper by wrapper:

• Gold ETF SIP: most brokers support exchange-side SIPs into ETFs — a standing order buys units at market on chosen dates. You need a demat account, you pay brokerage and the usual transaction charges, and one unit typically represents a small fraction of a gram (the cluster's ETF post details unit sizes from ~0.01g upward). Best for investors already trading stocks.
• Gold fund (FoF) SIP: the AMC debits your bank account monthly and buys ETF units for the fund — no demat, ₹500 minimums, standard mutual fund onboarding. The cost is the extra expense layer (roughly 0.1-0.5% on top of the ETF's own TER, per the cluster's comparison). Best for everyone else.
• What you own either way: the gold price, minus expense ratios — no making charges, no 3% GST on purchase, no purity disputes, no locker rent, and full liquidity at NAV or market price. That last set of zeroes is exactly what the locker bangles never had.

The cost table, from our gold ETF versus gold fund post: the ETF layer charges roughly 0.3-0.8% a year (GoldBeES alone is quoted between 0.45% and 0.81% depending on what the tracker includes — confirm the current TER on the AMC page), and a FoF adds roughly 0.1-0.5% on top. A ₹5,000 monthly SIP held five years, projected at an 8% annualised gold return with a 0.8% all-in drag, lands near ₹3.68 lakh against ₹3 lakh invested — a projection, not a promise, and the site's SIP calculator reruns it at your assumptions. The point of the arithmetic is the drag itself: the FoF's extra layer must be paid for in convenience every single year, which is why demat-owning investors should default to the direct ETF SIP.

The tax line, briefly

Gold ETFs and gold funds are taxed on the post-July 2024 rules: units sold within 12 months attract your slab rate — the 20% short-term equity rate does not apply to gold — and units held beyond 24 months qualify as long-term at 12.5% without indexation (Source: CBDT FAQs on the capital-gains regime, July 2024, as applied in our gold taxation post). Each SIP instalment carries its own holding clock, FIFO-style. Compared with GMS's tax-free interest, this is a worse tax shape — but against 2.5% taxable-equivalent interest that nobody took anyway, the market exposure is the product, not the coupon.

The worked plan: from locker to ladder

Take the eighty grams. Three honest routes. Route A — leave it: sentimental jewellery stays jewellery; make no pretence that it is an investment, and stop counting it in your net-worth math beyond its bullion value. Route B — pledge it: a gold loan against the bangles raises liquidity at 9-12%-type interest rates without selling (our gold loan guide covers the appraisal and per-gram mechanics) — a financing tool, not an investment. Route C — monetise and re-deploy: sell the non-sentimental portion through a BIS-hallmarked buyer with a proper invoice (our physical gold guide walks purity and buy-back spreads), then run the proceeds as a lumpsum-plus-SIP into a gold fund — converting dead locker metal into a priced, liquid, taxable-when-sold position. For the family whose gold is truly idle, Route C plus a monthly gold SIP is what GMS promised and never quite delivered.

What goes wrong in the gold ETF SIP

• Expecting the GMS coupon. There is no interest in an ETF — you own price exposure, full stop. The 2024-26 gold rally made price exposure look like interest; it is not.
• Buying digital gold instead. Unregulated platforms selling "24K digital gold" carry platform and spread risks the regulated ETF route does not — the four-way comparison post covers that gap.
• Terrible timing discipline. A gold SIP's job is exactly like an equity SIP's: instalments through falls. The August-September 2026 correction (-4.78% monthly return per AMFI-reported data) is the behaviour, not the failure.
• Mixing up the wrappers' costs. The FoF's extra expense layer compounds; for demat-owning investors the direct ETF is cheaper. For everyone else the convenience is worth the layer — just know which you are paying for.
• Ignoring the 24-month clock. Selling a gold fund within a year pays slab-rate tax. Match the SIP to a horizon beyond two years, or accept the tax shape.

The verdict

The Gold Monetisation Scheme is history — discontinued from March 26, 2025, with existing deposits running to maturity and nothing replacing it. Its real successor is not a scheme at all: it is a monthly SIP into a gold ETF or gold fund, which delivers the price exposure, the liquidity, the small-ticket access and the regulatory wrapper that locker gold never had. For the sentimental metal, keep it as jewellery and stop pretending; for the gold allocation in your portfolio, automate it. The four-way comparison and the taxation post cover the rest of the decision tree.

This is educational content, not investment advice. Consult a SEBI-registered adviser for decisions specific to your situation.