The Original Goal: Putting Idle Gold to Work
Launched in 2015, the Gold Monetisation Scheme had a straightforward objective: encourage households and institutions to deposit their unused gold with banks. Instead of gathering dust in a locker, the gold could be melted, refined, and loaned out to jewellers,
reducing India's heavy reliance on gold imports. In return, depositors would earn interest on their gold, with the principal and interest being exempt from capital gains, wealth, and income taxes. The scheme offered short-term bank deposits (1-3 years) and medium to long-term government-backed deposits (5-15 years). However, the idea of melting down sentimental family jewellery and a cumbersome process meant the scheme struggled to attract widespread participation.
Why the Scheme Needed a Reboot
Despite India holding one of the world's largest private gold reserves, estimated at over 25,000 tonnes, the GMS managed to mobilise only around 39 tonnes by March 2025. This represents a tiny fraction—less than 0.2%—of the total idle gold. The reasons for the low uptake were numerous. Many potential depositors were unaware of the scheme, while others were hesitant to part with inherited jewellery that holds emotional value, only for it to be melted down. Logistical hurdles, like the limited number of collection and purity testing centres, and a lack of trust in the banking system for this specific purpose, also played a significant role. Ultimately, the tepid response led the government to discontinue the medium and long-term deposit options for new participants from March 2025, leaving only the short-term deposits active at the discretion of individual banks.
The Key Proposed Change: Involving Jewellers
The centrepiece of the revised GMS is a plan to bring local jewellers into the fold as collection partners. Instead of navigating the formal banking system, which can be intimidating, depositors could go to their trusted family jeweller to deposit their gold. Under the proposals being discussed, these jewellers would act as the initial point of contact, handling the collection and preliminary purity checks before passing the gold to refiners and banks. In exchange for this service, jewellers would likely earn a commission, with some industry proposals suggesting a rate of up to 1% of the gold's value. The government hopes that leveraging the deep-rooted trust between customers and their local jewellers will significantly boost participation and make the process far more convenient and accessible.
Potential Benefits for Depositors
For depositors, a jeweller-led model could make the entire process simpler and more comfortable. It offers a familiar, trusted channel to finally earn a return on an asset that is otherwise unproductive. The convenience of a wider network of collection points would make the scheme accessible to more people, especially outside major urban centres. For the broader economy, successfully mobilising even a fraction of this idle gold could reduce the country's import bill, which hit nearly $72 billion in fiscal year 2026, and ease pressure on the current account deficit. It would also increase the domestic supply of gold available for the jewellery manufacturing industry.
What to Watch Out For
While the proposed changes address the critical issue of access and trust, some challenges remain. The core proposition still requires depositors to agree to have their jewellery melted down, which remains a significant emotional hurdle for many. Furthermore, some households may still be hesitant due to fears of scrutiny from tax authorities about the source of their gold holdings, a concern that has been cited as a major reason for the scheme's low participation so far. The success of the revamped scheme will ultimately depend not just on operational ease, but on building confidence that the gold is weighed, valued, and managed transparently and fairly from the moment it leaves the depositor's hands.
