The Golden Ambition
Launched in 2015, the Gold Monetisation Scheme (GMS) had a grand vision: to unlock the estimated 25,000 tonnes of gold lying dormant in Indian households and temple vaults. The core idea was simple: encourage people to deposit their physical gold—be it jewellery,
bars, or coins—with banks and earn interest on it, just like a cash deposit. This deposited gold could then be lent to jewellers or used for other productive purposes, reducing the country's heavy reliance on gold imports. The economic stakes are high; in the 2026 fiscal year alone, India's gold import bill surged to a record $71.9 billion, putting pressure on the nation's balance of payments.
Why the Scheme Stumbled
Despite its compelling logic, the GMS has seen a lacklustre response. Since its inception, the scheme has mobilised only around 39 tonnes of gold, a tiny fraction of the total private holdings. Several factors contributed to this low uptake. A deep-seated emotional and cultural attachment to jewellery meant many were unwilling to have their heirlooms melted down into standard gold bars, which is a necessary step in the process. Furthermore, issues of trust, complex procedures involving purity testing centres, and fears of scrutiny from tax authorities made potential depositors hesitant. For banks, the logistical costs of collecting, transporting, and refining the gold often outweighed the financial incentives.
Withdrawing Key Components
In a significant move, the government discontinued the Medium-Term (5-7 years) and Long-Term (12-15 years) deposit components of the GMS effective March 26, 2025. The finance ministry cited the scheme's performance and evolving market conditions as reasons for the change. This left only the Short-Term Bank Deposit (1-3 years) option active, offered at the discretion of individual banks based on commercial viability. The decision was seen as a way to reduce the government's future financial liabilities, especially with gold prices rising, as it was responsible for the interest payments on the medium and long-term deposits.
A Jeweller-Led Rework
Now, a major revamp is on the cards, with a new strategy to make the scheme more accessible and attractive. The centrepiece of the proposed rework is to involve jewellers directly in the process. Instead of customers going to banks or designated centres, they could deposit their old gold with their trusted local jeweller. Under a proposal from the India Bullion and Jewellers Association (IBJA), these jewellers would act as collection partners, handling the initial process before transferring the metal to refiners. To encourage participation, jewellers could receive an incentive of around 0.75% to 1% on the value of the gold they collect.
What's In It for Jewellers?
Beyond the direct commission, the revamped scheme offers a more significant benefit to jewellers: access to cheaper financing. Currently, jewellers who borrow gold through a Gold Metal Loan (GML) using imported gold pay interest rates of around 5%. By sourcing gold domestically through the GMS, this financing cost could drop significantly, potentially by 1-2 percentage points. This would reduce their working capital expenses and hedging costs, making their business operations more efficient. This access to a domestic pool of gold is the primary incentive that proponents hope will encourage jewellers to actively promote the scheme to their customers.
The Road Ahead
The success of this potential GMS 2.0 hinges on rebuilding trust. While using jewellers as a familiar touchpoint may ease procedural hurdles, the fundamental reluctance of households to part with their gold and concerns over official scrutiny remain significant challenges. The government's challenge is to create a framework that is simple, transparent, and rewarding enough to convince millions of Indians that the gold in their lockers can be both a cherished possession and a productive financial asset. The proposed changes represent a pragmatic shift, acknowledging that leveraging the existing trust between customers and jewellers may be the key to finally unlocking India's sleeping golden fortune.
