An Old Plan with a Big Ambition
In 2015, the government launched the Gold Monetisation Scheme (GMS). The idea was simple and powerful: get the vast reserves of gold held by households and institutions into the formal banking system. People could deposit their gold, earn interest on it,
and in the long run, help reduce India's heavy reliance on gold imports. This idle gold—estimated to be between 25,000 and 34,600 tonnes—was seen as 'dead capital'. Putting even a fraction of it to productive use could boost the economy, increase banking liquidity, and lower the country's import bill, which hit a staggering $71.9 billion in the last financial year.
Why the Original Scheme Faltered
Despite its lofty goals, the GMS never quite took off. In its first decade, the scheme managed to mobilise only about 39 tonnes of gold—a tiny fraction of the total household stock. The reasons for this failure are multifaceted. A primary issue was a fundamental lack of trust. Many families were reluctant to hand over inherited or sentimental jewellery to banks, fearing it would be melted down. The operational side was also cumbersome. There was confusion about which bank branches even accepted deposits, and the process was not seen as user-friendly. Furthermore, the financial incentives, like interest rates, were often perceived as too modest to justify parting with a deeply trusted asset. By March 2025, the government had discontinued the medium and long-term deposit portions of the scheme, effectively scaling it back significantly.
Introducing a Jeweller-Led Approach
Now, a new proposal is on the table, aiming to breathe life back into the gold monetisation effort. The centrepiece of this revamped plan is to bring a key player into the fold: the local jeweller. The proposal, submitted by the India Bullion and Jewellers Association (IBJA), suggests that jewellers act as the primary collection points for the scheme. This change is rooted in a simple reality of the Indian market—while people may be wary of banks when it comes to gold, they have long-standing relationships with their family jewellers. The idea is to leverage this existing trust to encourage participation. Under this new framework, the operational role of banks would be minimal, with jewellers handling the customer-facing process.
Fixing the Trust and Incentive Problem
This new model directly addresses the core problems of the old GMS. By making jewellers the face of the scheme, the plan hopes to overcome the trust deficit that plagued the bank-led model. To make it worth their while, the proposal includes an incentive for jewellers, potentially a commission of around 1% on the value of the gold they collect and transfer to refiners. This would turn jewellers into active promoters of the scheme, potentially increasing footfall in their stores and offering a new service to clients. For the customer, the process becomes simpler and more familiar, dealing with a trusted local business rather than a faceless bank. This structural shift is designed to make depositing gold more attractive and accessible for everyone, from large holders to those with smaller quantities.
The High Stakes for the Economy
The urgency behind this new push is clear. High gold imports put significant pressure on India's current account deficit, making the economy vulnerable to global price shocks. In the last financial year, India paid 24% more for gold despite importing nearly 5% less by weight, highlighting the financial strain. Mobilising domestic gold is not just about reducing imports; it's about transforming a massive, idle asset into productive capital. Some estimates suggest that channelling even 2% of household gold into the financial system annually could add trillions of dollars to India's GDP by 2047 through a multiplier effect. By financing sectors like infrastructure and manufacturing, this 'dead capital' could become a powerful engine for economic growth.
