What is the Proposed New Policy?
The government is reportedly evaluating a proposal to bring jewellers into a revamped Gold Monetisation Scheme (GMS) for the first time. Under this new model, trusted local jewellers would act as collection and aggregation centres. Customers could deposit
their old gold jewellery, coins, or bars with these jewellers, who would then handle the initial purity checks, documentation, and transfer of the gold to authorised refiners and banks. The goal is to make it far easier for ordinary households to deposit their idle gold into the formal financial system and earn interest on it. This marks a significant change from the previous bank-led model, which struggled to gain traction.
Why the Change? The Economic Imperative
India’s appetite for gold is enormous, but the country mines very little of it. This means most of the demand is met through expensive imports, which puts pressure on India's foreign exchange reserves and weakens the rupee. In fiscal year 2026, India's gold imports cost nearly $72 billion. Meanwhile, an estimated 25,000 to 30,000 tonnes of gold, worth trillions of dollars, is lying idle in household lockers and temple vaults across the country. By encouraging people to deposit this gold, the government hopes to create a large domestic supply of the metal. This recycled gold can then be used by the jewellery industry, reducing the need for costly imports and strengthening the nation's economic stability.
Learning from Past Failures
This isn't the government's first attempt. The Gold Monetisation Scheme, originally launched in 2015, was designed with the same objective but had very limited success. In over a decade, the scheme has managed to mobilise only around 39 tonnes of gold—a tiny fraction of the total household holdings. Experts point to several reasons for this failure: a lack of trust in parting with family gold at impersonal banks, a cumbersome deposit process requiring visits to designated testing centres, and poor marketing. Many people were simply unaware the scheme existed or found it too complicated. The government effectively scaled back the scheme in March 2025 by discontinuing its medium and long-term deposit options.
The Jeweller's New Role and Incentive
The new proposal hinges on the idea that people trust their local jeweller more than a bank or an unfamiliar testing centre. Jewellers have the existing network, customer relationships, and expertise to make the scheme more accessible. To encourage their participation, the proposal includes a service fee or commission for the jewellers. According to the India Bullion and Jewellers Association (IBJA), which submitted a proposal to the government, jewellers could earn a commission of around 0.75% to 1% on the value of the gold they collect. This would create a new revenue stream for them and provide a strong incentive to actively promote the scheme to their customers.
Hurdles and Lingering Questions
While promising, the plan faces challenges. The biggest hurdle remains sentimental value; much of the gold held by Indian families is in the form of inherited jewellery, and owners are often reluctant to have it melted down. The process turns unique ornaments into standardised gold bars, which is a major emotional barrier. Furthermore, there are practical concerns about transparency, traceability, and ensuring the purity assessment process is fair. Another significant issue is taxation. Potential depositors may worry that declaring large quantities of gold could attract scrutiny from tax authorities, a fear that has hampered such schemes in the past. The success of this revamped policy will depend on building a system that is not only convenient but also transparent and trustworthy enough to overcome these deep-seated concerns.
