India has terminated a decade-old program that allowed citizens to deposit gold with banks in exchange for interest payments, keeping only short-term options alive in a move reflecting the scheme’s limited success.

The Finance Ministry announced Tuesday it would discontinue medium and long-term deposits under its Gold Monetization Scheme effective March 26, while allowing banks to continue offering short-term facilities at their discretion.

Gold prices in India have jumped more than 41% since January 2024, reaching 90,450 rupees ($1,085) per 10 grams in late March, creating both challenges and opportunities for policymakers.

The scheme, introduced in 2015 by Prime Minister Narendra Modi’s government, attracted just 31.16 kilograms of gold from about 5,700 participants over nearly a decade — a fraction of the estimated 25,000 tonnes of gold held by Indian households and religious institutions.

Depositors earned 2.25% interest on medium-term deposits (5-7 years) and 2.5% on long-term options (12-15 years), rates that proved insufficient to overcome traditional reluctance to part with family gold.

The Reserve Bank of India confirmed existing deposits would remain protected until maturity, with depositors retaining all contractual rights.

This marks India’s second retreat from gold-related financial products in recent months, following its decision to halt issuance of sovereign gold bonds amid surging prices.

Gold remains culturally significant in India as both a status symbol and preferred investment, with demand typically spiking during wedding seasons and religious festivals.

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