Gold Deposit Scheme

By Team Gullak

Nov 13, 2024

5 min read

As of 2023, Indian households were reported to have 21,000 tonnes of gold. Back in 1999, the government of India devised a way to encourage individuals and institutions to deposit their idle gold with banks in exchange for interest and other benefits. This scheme was called the gold deposit scheme(GDS).

In this article we will delve into what the Gold Deposit Scheme is, how you can benefit from it and comparison with other gold schemes.

What is the Gold Deposit scheme?

Most of the gold in India gets imported from outside. The Indian government wanted to reduce the dependence on imports and hence introduced the Gold deposit scheme. Under the scheme, you could submit your existing gold(like gold jewellery, gold coins etc) to banks. The banks would convert this gold into bullion & lend it to jewellers and other parties. In turn, you’d receive extra interest on your gold. This scheme incentivised Indians to mobilise the idle gold in their households.

Key features of the gold deposit scheme:

> Extra interest: 0.75% - 1% pa on top of gold price increase

> Minimum gold deposit: 500 gms

> Scheme Tenure: 3-7 years

> Form of withdrawal: Cash

Gullak Gold+: An alternative to Gold Deposit scheme

Gullak Gold+ is a gold investment scheme which allows you to grow your gold quantity every year. With Gold+, you can grow your gold quantity by 5% every year.

What does this mean?

Say, you invest 100 gms today in Gullak Gold+, in one year you’ll have 105 gms in 1 year. Your extra gold compounds every year, so next year you’ll get another 5% on top of this 105 gms. After 8 years, you’ll have 148 gms, which is a 50% increase in gold quantity. All the 148 gms also benefit from gold price increase.

Key features of Gullak Gold+:

> Extra interest: Extra 5% gold every year

> Minimum Investment: 0.5 gms

> Tenure: None, you can withdraw anytime

> Form of withdrawal:cash or gold or redeem jewellery at Gullak’s partner stores

Comparison: Gold Deposit scheme vs Gullak Gold+

In this section, we will compare both the schemes under a number of parameters:

Table: Gold Deposit scheme vs Gullak Gold+

Drawbacks of the Gold Deposit scheme

With the gold deposit scheme, there are 3 fundamental drawbacks:

1. It relies on people submitting their existing gold to banks. Indians generally have a huge sentimental attachment to gold(specially, jewellery). Under the gold deposit scheme, your gold gets converted to bullion and hence you can’t get it back as gold. A lot of Indians wouldn’t want to give away their gold jewellery.

2. Extra returns: The extra 0.75%-1% aren’t lucrative enough for people to participate in the scheme.

3. Lock-in period: With a 3-7 years lock-in period, the Gold Deposit scheme allows very little flexibility to investors.

On the flip side, Gullak Gold+ tackles all the problems that the Gold deposit scheme comes with. All investments on Gullak are fresh gold investments, You get a whopping extra 5% gold every year and there are no lock-in periods as well. When withdrawing you can get it back in any form you prefer, like coins, cash or even redeem jewellery of equivalent amounts from Gullak’s partner stores.

Concluding thoughts on Gold Deposit scheme

The gold deposit scheme is an excellent option for people who have excess gold in their households and want to use it to earn more returns. However, if you’re looking at this from an investment perspective and want to purchase new gold, Gullak Gold+ offers higher returns on gold investments.

The choice ultimately lies with you as an investor. Make sure to do your research before choosing any gold scheme.