Gold Monetisation Scheme Explained: Govt Likely To Revamp GMS, Here's What It Means

The Centre might be preparing to revive one of its key gold sector reforms. According to a Moneycontrol report, the government is likely to announce a revamped version of the Gold Monetisation Scheme (GMS) within the next two weeks. The report said the new framework could allow jewellers to act as collection partners for household gold deposits, a role that was previously restricted to banks.

If implemented, the move would mark a significant change in the way the scheme operates and could help address some of the structural issues that limited its success over the past decade.

What is the Gold Monetisation Scheme?

The Gold Monetisation Scheme was launched by the central government in 2015 with the objective of mobilising idle gold lying with households and institutions and reducing

India’s dependence on gold imports.

India is among the world’s largest consumers of gold. While the metal is deeply embedded in the country’s culture and is widely held as a store of wealth, a substantial portion of these holdings remains unused. The scheme was designed to encourage people to deposit their idle gold with authorised institutions instead of keeping it locked away.

Under the scheme, deposited gold could be refined and put to productive use by the banking system and the jewellery industry. In return, depositors earned interest on their gold holdings and received either the equivalent quantity of gold or its cash value at maturity, depending on the type of deposit.

Why was the scheme introduced?

The primary objective was to reduce India’s gold imports, which put pressure on the country’s current account deficit and increase demand for foreign exchange.

By mobilising domestically held gold, the government hoped to create an alternative source of supply for jewellers, reduce reliance on imported bullion and bring idle household wealth into the formal economy.

Why did the scheme fail to gain traction?

Despite its objectives, the scheme saw limited participation. According to government data, only around 38 tonnes of gold had been mobilised by March 2025, since its launch in 2015, a tiny fraction of India’s estimated household and institutional gold holdings, which are often estimated at around 25,000 tonnes.

Several factors contributed to the poor response. For many households, jewellery is more than an investment — it carries emotional, cultural and religious significance. Families were often reluctant to part with inherited ornaments that would have to be melted during the deposit process.

There were also concerns over documentation requirements and possible tax scrutiny relating to old gold holdings. On the institutional side, banks reportedly had limited commercial incentive to actively promote the scheme, as gold deposits offered little balance-sheet advantage.

The scheme also became expensive for the government. Since depositors earned interest while also benefiting from any appreciation in gold prices, the cost of servicing these deposits increased significantly. The Centre eventually discontinued medium-term and long-term deposit variants in 2025.

What could change under the revamped scheme?

According to a Moneycontrol report, the government is working on a revamped Gold Monetisation Scheme and the move is expected to mobilise over 1,000 tonnes of gold.

Currently, banks have played the central role in accepting deposits under the scheme. Bringing jewellers into the ecosystem could improve accessibility for consumers, given their established relationships with customers and extensive retail presence.

Industry bodies have long argued that expanding the network beyond banks could improve participation while helping reduce dependence on imported gold without affecting domestic demand for jewellery.

India imports a significant quantity of gold every year, making the country vulnerable to fluctuations in global prices and increasing demand for US dollars.