Gold Monetisation Scheme: How to unlock the value of your idle gold – explained

The vast wealth lying idle in lockers can be put to productive use through this scheme. Someone with 100 grams of gold can earn up to Rs 25,000 a year on the investment. (AI image)

Gold has often been derided as a dead investment that neither gives dividends nor earns income for the investor. But the Gold Monetisation Scheme introduced in 2015 changed that. The scheme transforms physical gold into a productive financial instrument. Individuals and institutions can deposit their gold with designated banks and earn 2.25-2.5% interest per annum on the value of the gold.The vast wealth lying idle in lockers can be put to productive use through this scheme. Someone with 100 grams of gold can earn up to Rs 25,000 a year on the investment.It is a simple process: coins, bars or jewellery (excluding gemstones) are tested for purity by an authorised collection and purity testing centre. The minimum deposit is 10 grams, with no upper limit. The tenure is 1-3 years. Once gold is deposited, the depositor gets a certificate issued by the collecting bank. On maturity, investors can redeem their gold or opt for cash plus the accrued interest.Despite the benefits it offers, the scheme has not found many takers. This is largely because of the sentimental value attached to gold in Indian society, particularly jewellery handed down through generations. Experts say the Gold Monetisation Scheme suits those holding idle or broken gold they don’t intend to use.It does not suit those emotionally attached to their jewellery, as the ornament is melted and the original form cannot be retrieved.If you want to unlock the value of your gold but want to retain the jewellery, you can opt for a gold loan. Unlike the Gold Monetisation Scheme, which results in a permanent loss of the asset, gold loans allow borrowers to retain ownership while unlocking liquidity.It’s a simple arrangement: the individual pledges his gold ornaments to a bank or NBFC and receives a loan equivalent to 85% of the gold’s market value. Most lenders accept 18 to 22 karat jewellery, but don’t include precious and semi-precious stones. The valuation of gold is based on purity and prevailing market rates, determined through electronic testing methods. The pledged gold is securely stored by the lender and returned once the borrower repays the principal along with interest.Interest rates range from 9% to 15%, significantly lower than what is charged on unsecured credit such as personal loans or credit cards. Lenders also charge processing fees (0.5%-2% of loan amount), valuation charges, documentation fees and penalty interest on delayed payments. There are flexible repayment options. Borrowers can choose regular EMI plans, periodic interest payments or overdraft where interest is charged only on the amount utilised.Unlike personal loans, gold loans do not require a strong credit history or income proof, making them highly accessible. Demand for gold loans surged in 2025 due to easy availability, minimal documentation, and rapid disbursal.