India is one of the world’s largest consumers of gold. The precious metal holds deep cultural and emotional significance in the country, but it also presents an economic challenge. Thousands of tonnes of gold remain idle in homes, bank lockers, and temples, while India continues to import large quantities of gold every year to meet domestic demand. This puts pressure on the country’s foreign exchange reserves and widens the trade deficit.
To address this issue, the government is preparing to introduce the Gold Monetisation Scheme (GMS) in a new and more effective form. The objective is not only to help people earn returns on their idle gold but also to reduce the country’s dependence on imports by bringing domestic gold into the formal financial system. If implemented successfully, the revamped scheme could become an important step towards strengthening India’s economic self-reliance.
What’s Happening?
The central government may introduce a revamped version of the Gold Monetisation Scheme (GMS) within the next two weeks. Under the proposed changes, not only banks but also jewellers across the country could be appointed as collection partners to accept idle gold from households. The collected gold would then be brought into the formal financial system through banks and refiners. The government’s target is to mobilise more than 1,000 tonnes of gold through the new framework.
Under the Gold Monetisation Scheme (GMS), individuals can deposit the gold lying idle in their homes with banks and earn interest on it. At maturity, they receive the proceeds according to the scheme’s prescribed rules. The revamped scheme aims to put unused household gold to productive use while reducing the country’s reliance on imported gold.
Why did the Scheme not Get the Expected Success Earlier?
The Gold Monetisation Scheme was launched in 2015 with the objective of bringing idle household gold into the banking system and making it a productive financial asset. Under the scheme, deposited gold is tested, melted, and converted into gold bars. In return, depositors earn interest and receive either physical gold or its cash equivalent at maturity, depending on the applicable terms.
However, the scheme failed to achieve the expected response. Despite India holding an estimated 25,000 tonnes of household gold, only about 38-39 tonnes have been monetised over the past 10 years. Many families were reluctant to deposit their jewellery because of its emotional and religious significance, especially since the gold had to be melted. In addition, cumbersome paperwork, concerns about tax scrutiny, limited public awareness, and low business incentives for banks also discouraged participation.
What Changes are Proposed in the New Scheme?
Under the proposed revamp, jewellers will be included as collection partners, making the scheme more convenient and accessible. They will carry out the initial assessment of the gold before linking it to the banking and refining system. Jewellers will also receive a service fee for their role in the process.
This change is expected to improve participation and help bring a larger quantity of household gold into the formal economy. In FY26, India’s gold import bill reached a record $71.98 billion, up 24% from the previous year. Even if a small portion of domestic gold is mobilised through the scheme, it could reduce import dependence and help save valuable foreign exchange.
What Does This Mean for Investors?
The proposal is particularly relevant for investors and households with gold that has remained idle for years. If the revamped scheme offers a simple and transparent process, they could earn interest on their unused gold while keeping it within a secure financial framework.
At a broader level, the initiative could strengthen the economy by reducing the gold import bill and easing pressure on the country’s external finances. However, investors should wait for the final guidelines, which are expected to provide clarity on interest rates, deposit tenure, eligibility criteria, and the maturity payout structure.
What’s Next?
The government’s initiative could redefine the role of gold in India from being merely a traditional investment or jewellery to becoming an active financial asset. If the new model, with jewellers as collection partners, is implemented successfully, the scheme could reach a much larger section of the population. This would help bring idle household gold into the formal financial system while allowing depositors to earn returns on it.
The success of the revamped scheme will depend on how effectively it addresses people’s concerns around convenience, transparency, and the emotional value attached to gold. If these challenges are managed well, the initiative could improve the utilisation of domestic gold, reduce import dependence, promote financial inclusion, and reshape the way Indians view their gold holdings.
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