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India ends parts of its gold deposit scheme due to rising prices

India ends parts of its gold deposit scheme due to rising prices

India has discontinued a part of a scheme which encouraged households and institutions in India to deposit gold as a form of interest payment.

Gold deposits were available for 1 to 3 years, 5 to 7 years, and 12-15 years under the gold monetisation program, which was introduced in 2015.

The Finance Ministry announced late Tuesday that the 5-to-7-year and 12-to-15-year deposits had been discontinued. It cited the changing market conditions and the performance of the scheme.

The ministry stated that banks can continue to provide short-term gold deposit based on their commercial viability.

This move will reduce future government obligations and minimize risks associated with gold prices. The government pays the interest for medium and long term deposits. While the banks pay the interest on short-term deposit, they do not pay it to the government.

Gold prices, seen as a hedge to geopolitical and financial uncertainties, are up more than 15 percent this year. This is due to the escalating tensions in geopolitics and uncertainty over U.S. Tariff policy.

India's Finance Ministry said that existing gold reserves will be maintained until maturity.

The Reserve Bank of India amended its master instructions on the scheme in order to reflect the changes. Reporting by Aleef Jhan in Bengaluru

(source: Reuters)