The Reserve Bank of India (RBI) has made changes in the Gold Monetisation Scheme (GMS) to make it more attractive.
The revamping of the scheme is aimed at enabling people to open a hassle-free gold deposit account.
The short-term deposits should be treated as bank's on-balance sheet liability, the RBI said in a notification.
"These deposits will be made with the designated banks for a short period of 1-3 years (with a facility of roll over). Deposits can also be allowed for broken periods (e.g. 1 year 3 months; 2 years 4 months 5 days; etc.)," it said.
The interest rate payable in the case of deposits for maturities with broken periods should be calculated as the sum of interest for the completed year plus interest for the number of remaining days, it added.
In 2015, the government launched the GMS with the objective of mobilising the gold held by households and institutions in the country.
"The Medium Term Government Deposit (MTGD) can be made for 5-7 years and Long Term Government Deposit (LTGD) for 12-15 years or for such period as may be decided by the Central Government from time to time. Deposits can also be allowed for broken periods (e.g. 5 years 7 months; 13 years 4 months 15 days; etc.)," it said.
The scheme allows banks' customers to deposit their idle gold holdings for a fixed period in return for interest in the range of 2.25 per cent to 2.50 per cent.
In the case of MLTGD, it said, the redemption of principal at maturity should, at the option of the depositor, be either in rupee equivalent of the value of deposited gold at the time of redemption, or in gold.
"However, any pre-mature redemption of MLTGD shall be only in INR. Where the redemption of the deposit is in gold, an administrative charge at a rate of 0.2 per cent of the notional redemption amount in terms of INR shall be collected from the depositor," it said.
The interest accrued on MLTGD will be calculated with reference to the value of gold in terms of rupees at the time of deposit and will be paid only in cash, it said.
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