What Was the Original Scheme?
Launched in 2015, the Gold Monetisation Scheme (GMS) had a simple and powerful idea: let people deposit their physical gold—be it jewellery, bars, or coins—into a bank account and earn interest, just like a cash fixed deposit. The goal was to mobilise
the estimated 25,000 tonnes of gold held by households and institutions. This would reduce India's reliance on expensive gold imports, which strain the nation's foreign exchange reserves, and make the metal available for the domestic jewellery industry. Under the scheme, depositors could choose short, medium, or long-term deposits, earning tax-free interest on their holdings.
A Golden Idea That Didn't Quite Shine
Despite its promising premise, the GMS never achieved significant traction. After nearly a decade, it had managed to collect only about 39 tonnes of gold by mid-2026—a tiny fraction of the total household hoard. The reasons for the lacklustre response were numerous. Many potential depositors found the process cumbersome, involving trips to specific Collection and Purity Testing Centres (CPTCs). A major emotional barrier was that deposited jewellery would be melted down, meaning sentimental pieces would be lost forever. Furthermore, the interest rates were not seen as compelling enough, and a general lack of awareness and trust in giving family gold to banks hampered participation. The scheme's underperformance eventually led the government to discontinue new medium and long-term deposits in March 2025.
GMS 2.0: What Does 'More Accessible' Mean?
The potential new version of the scheme aims to fix the core problems of the original by making participation far easier and more trustworthy. The biggest proposed change is bringing local jewellers into the process. Instead of dealing with unfamiliar banks or testing centres, customers could go to their trusted family jeweller to deposit their gold. These jewellers would act as collection agents, handling the initial checks before passing the gold to refiners and banks. To encourage their participation, jewellers would likely earn a commission, reportedly around 0.75% to 1% of the value of the gold they collect. This shift leverages the deep-rooted trust that customers have in their local jewellers, a relationship that banks could not replicate.
Why the Government Is So Keen
The government's motivation to revive the GMS is rooted in solid economic logic. India is one of the world's largest gold importers, and this puts significant pressure on its trade balance. For instance, in the financial year 2026, India imported less gold by weight than the previous year but ended up paying 24% more for it—a staggering $71.98 billion—due to rising global prices. Successfully mobilising even a small portion of the country's domestic gold could drastically reduce this import bill. This would help stabilise the rupee, strengthen the country's foreign exchange reserves, and provide a steady, domestic source of raw material for the massive gems and jewellery industry.
Will It Work This Time?
The inclusion of jewellers is seen by many in the industry as a game-changer that could finally unlock India's dormant gold reserves. By making the neighbourhood jeweller the face of the scheme, the government is addressing the critical issue of trust that plagued the first version. Jewellers would see increased footfall and a new service to offer clients, giving them a strong incentive to promote the scheme. However, success is not guaranteed. It will depend on ensuring the entire process is transparent, from weighing and testing to crediting the deposit. For the average household, the decision will still come down to a simple calculation: is the interest earned worth parting with their physical gold, even if the process is easier? The final details of the revamped scheme will determine the answer.
