A Multi-Trillion Dollar Hoard
Indian homes and temples are estimated to hold between 25,000 and 34,600 tonnes of gold. At current prices, this puts the value of this idle asset in the trillions of dollars. While this wealth sits in lockers and jewellery boxes, it doesn't actively
contribute to the economy. This forces India, one of the world's biggest consumers of gold, to rely heavily on imports to meet the demand from its vast jewellery industry. This reliance comes at a steep price. During the 2026 financial year, for instance, India’s gold import bill surged to nearly $72 billion. This was a 24% increase in value from the previous year, even though the actual volume of gold imported fell by almost 5%. Rising global prices mean the country pays more for less, putting significant pressure on its foreign exchange reserves and trade balance. This long-standing issue is the primary motivation behind the government's efforts to bring idle domestic gold into the formal financial system.
The Scheme That Failed to Shine
This isn't the government's first attempt to solve the problem. The Gold Monetisation Scheme (GMS) was launched back in 2015 with the precise goal of encouraging people to deposit their physical gold with banks and earn interest on it. The idea was to melt this gold, refine it, and supply it to jewellers, thereby reducing the need for imports. However, the scheme never gained significant traction. In the 11 years since its launch, the GMS has only managed to mobilise about 39 tonnes of gold. This represents a minuscule fraction—around 0.16%—of the lowest estimates of household gold holdings. The response was so muted that in March 2025, the government discontinued the medium and long-term deposit options under the scheme, citing its poor performance. The core issue, analysts believe, has always been a lack of trust and the emotional attachment people have to their jewellery, which they are hesitant to hand over to a bank for melting.
The New Proposal: Involve the Jeweller
Learning from past experience, the reported revamp has a new strategy at its core: bringing the local jeweller into the process. The government is reportedly evaluating a proposal to allow trusted family jewellers to act as collection centres for the scheme. The thinking is that while people may be wary of a formal banking process, they have long-standing relationships with their local jewellers. This move is designed to bridge the trust deficit that plagued the original scheme. Under the proposal, jewellers would collect gold from households, perform initial purity checks, and then forward it to authorised refiners and banks. In return for their services, they are expected to earn a handling fee or commission, with some reports suggesting a rate of around 1% on the value of the gold they mobilise. This would also give jewellers easier access to a domestic supply of raw material.
From Proposal to Possible Rollout
So, how would it work for an individual? A person would take their gold ornaments or bullion to a participating jeweller, who would act as an aggregator. After the initial assessment, the gold would be sent to a Collection and Purity Testing Centre (CPTC) to be melted and assayed for its exact purity. The equivalent weight in 995 fineness gold would then be credited to a Gold Deposit Account in the depositor's name at a designated bank. The depositor would earn interest on this balance in rupees, while the principal could be redeemed either in gold or its cash equivalent at maturity. Discussions on this revamped model have reportedly involved senior ministers, the RBI, banks, and gold trade representatives. According to multiple reports from August 2026, the government is keen to launch the scheme before the start of the festive season to maximise its potential impact, though no formal announcement has been made yet.
The Enduring Hurdles of Trust and Tradition
Despite the pragmatic new approach, significant challenges remain. The biggest obstacle is not logistical but cultural. In India, gold is often in the form of heirloom jewellery, passed down through generations and imbued with sentimental value. The idea of having these items melted down into anonymous gold bars is a major emotional barrier that a simple interest rate cannot easily overcome. Questions about the fairness of the purity assessment and the transparency of the melting process will also be critical to address. Furthermore, the GMS is a monetisation plan, not a tax amnesty scheme. This means individuals holding unaccounted-for gold may still be hesitant to participate, fearing scrutiny from tax authorities. Ultimately, the success of this revamped scheme will depend on whether households believe the process is fair, transparent, and respectful of their asset's emotional worth.
