The Mountain of Idle Gold
India has a unique economic challenge: a literal mountain of gold sitting unproductive in homes and temple vaults. Estimates suggest Indian households hold over 25,000 tonnes of gold, a figure that dwarfs the official reserves of most countries. From
an economic perspective, this is 'idle' capital. While it provides security to families, it does not circulate within the formal economy. This massive hoard contributes to India's reliance on gold imports to satisfy fresh demand from the jewellery industry and investors. In the 2026 fiscal year alone, gold imports cost the country nearly $72 billion, putting significant pressure on its current account balance. The government's long-standing goal has been to find a way to coax this domestic gold into the financial system, reducing the need for costly imports.
The Original Monetisation Plan
In 2015, the government launched the Gold Monetisation Scheme (GMS) with this exact objective. The idea was straightforward: individuals and institutions could deposit their physical gold with banks and earn interest on it, much like a fixed deposit. The collected gold would then be melted, refined, and made available to jewellers, creating a domestic supply chain. However, the scheme never gained significant traction. In over a decade, only around 39 tonnes of gold have been monetised—a tiny fraction of the total estimated holdings. The reasons for this lukewarm response are varied, including a lack of access points, cumbersome procedures, and a fundamental trust issue. Many families were reluctant to hand over sentimental heirloom jewellery to a bank, only for it to be melted down.
Enter the Family Jeweller
Recognising the shortcomings of the bank-led model, a revamped strategy is now under consideration: bringing local jewellers into the fold. The proposal, driven by industry bodies like the India Bullion and Jewellers Association (IBJA), would position jewellers as collection and aggregation centres. For generations, the family jeweller has been the most trusted entity in the gold ecosystem for buying, selling, and exchanging the precious metal. Under the new plan, a customer could take their gold to their trusted local jeweller, who would facilitate the entire process of testing, verification, and opening a gold deposit account with a partner bank. This leverages the vast, existing network and deep-seated customer relationships that banks could never replicate.
A Potential Win-Win-Win
If implemented effectively, this new approach could benefit all stakeholders. For consumers, it offers a convenient and trusted way to earn returns on an asset that would otherwise sit idle. For jewellers, it creates a new revenue stream. The proposal includes an incentive, possibly a commission of around 0.75% to 1% of the value of the collected gold, for their role as facilitators. This would not only boost their income but also increase footfall. For the Indian economy, the benefits are even greater. A successful scheme could significantly reduce the nation's import bill, strengthen the rupee, and provide the gems and jewellery sector with a more consistent and cheaper source of domestic gold.
Hurdles on the Golden Path
Despite the promise, significant challenges remain. The primary hurdle is still trust, but of a different kind. While customers trust their jewellers, the government needs to ensure the system is transparent and secure to prevent fraud. Standardising purity testing and ensuring traceability across thousands of participating jewellers will be a massive logistical undertaking. Furthermore, there are concerns about potential tax scrutiny. Many households may be hesitant to declare inherited gold for fear of attracting unwanted attention from tax authorities, an issue the original scheme also faced. The success of this ambitious revamp will ultimately depend on creating a seamless, transparent, and genuinely attractive proposition that convinces millions of Indians that their gold is better off working for them than sitting in a locker.
