What is the Gold Monetisation Scheme?
First launched in 2015, the Gold Monetisation Scheme (GMS) was designed to pull dormant gold out of lockers and into the formal economy. The goal was straightforward: encourage people and institutions to deposit their physical gold with banks and earn
interest on it, just like a fixed deposit. This deposited gold could then be lent to jewellers, reducing the country's heavy reliance on expensive gold imports. However, the scheme never quite took off. Since its inception, only about 39 tonnes of gold have been mobilised, a tiny fraction of the estimated 25,000 to 34,600 tonnes held by Indian households.
Why Hasn't the Scheme Worked So Far?
The scheme's performance has been lacklustre for several key reasons. A primary factor was a lack of trust and convenience. Many families were hesitant to hand over inherited jewellery to banks, which are not the traditional places for gold transactions. The process was also seen as cumbersome, involving purity testing, melting, and extensive paperwork. Furthermore, the government discontinued the medium- and long-term deposit options in March 2025, leaving only short-term deposits available at the discretion of individual banks. With limited access points and a complex procedure, the scheme failed to capture the public's imagination or their gold.
The Big Change: Bringing Jewellers into the Fold
The centrepiece of the revised plan is involving jewellers as collection and mobilisation agents for the first time. The proposal, which may be announced this month, acknowledges that the local jeweller is a more trusted and accessible figure for gold-related matters than a bank. Under the new framework, customers could deposit their old gold directly with participating jewellers. These jewellers would then handle the initial purity checks and pass the gold on to refiners and banks. To encourage their participation, jewellers are expected to earn an incentive, with reports suggesting a commission of around 0.75% to 1% on the value of the gold they collect.
What Does This Mean for the Economy?
The economic stakes are enormous. India is one of the world's largest importers of gold, a habit that puts significant pressure on its foreign exchange reserves and contributes to the current account deficit. In the 2026 fiscal year, for example, India spent nearly $72 billion on gold imports. By mobilising even a small portion of the country's domestic gold, the government hopes to create a cheaper, local supply for the jewellery industry. This would reduce the need for imports, provide the economy with billions in liquidity, and turn a non-productive asset into one that fuels economic activity.
Could This New Plan Finally Succeed?
By shifting the point of collection from sterile bank branches to familiar jewellery stores, the government is betting on convenience and trust. For the average person, this could mean an easier way to earn interest on gold that would otherwise sit in a locker, depreciating by its making charges. For jewellers, it offers a new revenue stream and a more stable supply of raw material. However, success will depend on a transparent and efficient process that ensures people feel their gold is being weighed and valued fairly. The exact details of the incentives, minimum deposit amounts, and operational framework will be crucial when the final announcement is made.
