The Challenge with 'Idle' Gold
India holds one of the world's largest private gold reserves, with an estimated 25,000 tonnes sitting in household lockers and temples. For years, the government has tried to bring this 'idle' gold into the formal economy through the Gold Monetisation
Scheme (GMS), first launched in 2015. The goal was twofold: to help citizens earn interest on their assets and to reduce the country's reliance on expensive gold imports. However, the original scheme struggled to gain traction among small savers. High minimum deposit limits (initially 30 grams), a complex verification process, and a limited number of bank branches accepting deposits made it impractical for the average family. As a result, only a tiny fraction of the nation's household gold was ever monetised.
Key Revisions to Make It Simpler
Recognising these hurdles, the government has introduced several important revisions to make the scheme more user-friendly. One of the most significant changes is lowering the minimum deposit amount to just 10 grams of raw gold, making it accessible to a much wider audience. Another major proposal involves allowing trusted local jewellers to act as collection and purity testing centres. This shift means individuals may soon be able to deposit their gold with a familiar local business instead of navigating a formal banking process, which many found intimidating. The plan is to create a more extensive network of access points, especially in smaller towns.
How It Works for Small Depositors
Under the revamped scheme, an individual can take their old jewellery, bars, or coins to a designated collection centre, which could be a bank or an approved jeweller. The gold is tested for purity and melted, and a certificate is issued for its value in 995 fineness gold. This value is then credited to a Gold Deposit Account in the customer's name. The depositor earns interest on this gold, which is exempt from income tax. At the end of the term—typically short-term deposits of 1-3 years—the customer has the option to receive their principal back either in physical gold or its equivalent value in Indian Rupees, an option that must be chosen at the time of deposit.
The Bigger Economic Picture
The push to unlock household gold isn't just about individual returns; it's a strategic economic move. By mobilising domestic gold, the government aims to increase the supply of gold available for the jewellery industry, thereby reducing the need for costly imports. This can help ease pressure on the country's current account deficit. The mobilised gold provides jewellers with a more reliable and potentially cheaper source of raw material. For the individual, it transforms a non-earning asset stored in a locker—which often incurs its own storage fees—into an interest-bearing deposit that offers both safety and growth. It's an attempt to shift gold from a passive saving to an active investment.
What to Consider Before Depositing
While the revised scheme is more attractive, there are a few things to keep in mind. The interest rates on Short-Term Bank Deposits are modest, often ranging from 0.50% to 0.60% per annum. Depositors should also be aware that their jewellery will be melted down and they will not get it back in its original form. This makes the scheme better suited for gold held as bars, coins, or old jewellery without sentimental value. Finally, while the Medium-Term (5-7 years) and Long-Term (12-15 years) deposit options have been discontinued for new applicants since March 2025, the Short-Term Bank Deposit (1-3 years) remains the primary avenue for new depositors.
