What is the Gold Monetisation Scheme?
Launched in 2015, the Gold Monetisation Scheme (GMS) was created with a simple, powerful idea: encourage Indian households and institutions to deposit their unused gold with banks. Instead of just sitting in a locker, the gold could be put to productive
use, earning interest for the owner. The goal was to formally channel a portion of the country's vast private gold reserves—estimated to be as high as 30,000 tonnes—into the financial system. This would, in turn, reduce India's heavy reliance on gold imports, which often strains the national trade balance. Under the scheme, depositors could bring their gold to be tested and refined, and the value would be credited to a special bank account, earning regular interest.
A Scheme in Need of a Polish
Despite its promising premise, the GMS has largely underperformed. In nearly a decade, it has managed to mobilise only around 39 tonnes of gold, a tiny fraction of the total household holdings. Several factors contributed to this lukewarm response. The process was often seen as cumbersome, requiring people to go to designated Collection and Purity Testing Centres (CPTCs) and deal with extensive paperwork. Many families were also reluctant to have sentimental heirloom jewellery melted down, a necessary step in the deposit process. For customers, the system lacked the convenience and trust associated with their local jeweller, while for banks, the scheme offered little commercial incentive.
Enter the Jeweller: The Proposed Revamp
The government is now considering a major overhaul that places jewellers at the heart of the scheme for the first time. Under the proposed framework, jewellery stores across the country would be allowed to act as collection and aggregation partners. A customer could take their old gold to their trusted local jeweller, who would handle the initial assessment, documentation, and transfer to authorised refiners and banks. This leverages the deep-rooted trust and existing relationships that jewellers have with their communities—a critical element that was missing from the bank-led model. To make it worthwhile, industry bodies have proposed that jewellers receive an incentive, possibly a commission of around 0.75% to 1% on the value of the gold they collect.
A Potential Win-Win-Win Scenario
Bringing jewellers into the fold could create a winning formula for all stakeholders. For customers, it offers a familiar and convenient entry point into the scheme, potentially overcoming the trust deficit that hampered previous efforts. For jewellers, it opens up a new revenue stream through service fees and commissions, while also providing them with a more consistent and lower-cost source of domestic raw material, reducing their own dependence on imports. For the government and the broader economy, a successful revamp could finally unlock a significant portion of the nation's idle gold, which industry bodies believe could inject massive liquidity into the system and substantially lower the country's gold import bill.
Hurdles on the Horizon
While promising, the plan is not without challenges. Key questions around transparency, traceability, and regulation will need to be addressed to ensure the process is secure for both consumers and the financial system. Standardising purity assessment across thousands of jewellery stores of varying sizes will be a significant logistical hurdle. Furthermore, while medium and long-term deposit options were discontinued in March 2025, the remaining short-term scheme's success depends on banks finding it commercially viable. The final details of the jeweller's role, their liabilities, and the exact incentive structure are still being discussed. Ultimately, the success of this revamp will hinge on creating a process that is not just convenient, but also inspires confidence in every participant.
