An Old Problem, A Fresh Approach
Indian households and temples are estimated to hold somewhere between 25,000 and 30,000 tonnes of gold, a vast, idle fortune. For years, the government has sought to bring this metal into the formal economy through the Gold Monetisation Scheme (GMS),
first launched in 2015. The goal was simple: encourage people to deposit their idle gold in banks, earn interest, and allow this gold to be used productively, thereby reducing the country's heavy reliance on expensive imports. However, the scheme has seen limited success, mobilising only around 39 tonnes in over a decade—a tiny fraction of the total holdings. The original bank-led model struggled to gain traction, largely due to logistical hurdles and a disconnect with how most Indians interact with their gold.
Enter the Jeweller
The proposed revamp, currently under discussion, introduces a fundamental change by positioning jewellers as the face of the scheme. According to a proposal by the India Bullion and Jewellers Association (IBJA), jewellers would act as collection and aggregation centres. Instead of customers going to a bank or a designated testing centre, they could go to their trusted local jeweller to deposit gold. The jeweller would handle the initial collection and documentation before forwarding the gold to authorised refiners for purity testing and crediting to a bank account. For their role, jewellers could earn an incentive or commission, with proposals suggesting a rate of around 0.75% to 1% of the collected gold's value.
Why This Could Work
The logic behind involving jewellers is rooted in trust and accessibility. Unlike banks, jewellers are the traditional point of contact for all gold-related matters in India. They have deep-rooted community ties and the expertise to handle gold. Proponents believe this relationship can bridge the trust deficit that has hampered the scheme so far. For customers, the process becomes far more convenient. For jewellers, it offers a new revenue stream and increased foot traffic. Furthermore, by increasing the domestic supply of recycled gold, the scheme could provide jewellers with access to raw material at a lower financing cost compared to imported gold, potentially reducing their operational expenses.
The Hurdles Remain Significant
Despite the promising new structure, significant challenges remain. The primary obstacle is convincing households to part with their gold, which often carries immense sentimental and cultural value beyond its market price. The idea of melting down inherited family jewellery is a major emotional barrier for many. Another significant concern for potential depositors is the fear of scrutiny from tax authorities once their holdings enter the formal financial system. Officials acknowledge that making the process easier may not be enough to overcome this deep-seated hesitation. Building a transparent and secure system for collection, purity testing, and accounting will be critical to building the confidence needed for the scheme to succeed on a large scale.
