What is the Proposed Plan?
The government is reportedly considering a major overhaul of the Gold Monetisation Scheme (GMS) by involving local jewellers for the first time. The plan proposes that jewellers could act as collection and aggregation centres, making it easier for households
to deposit their idle gold. Currently, the scheme requires people to go to designated banks and purity testing centres, which has been a barrier to wider adoption. This new model would leverage the trust and accessibility that families already have with their local jewellers. The idea is to channel the collected gold from households to authorised refiners and then into the formal banking system, creating a domestic supply of gold for the industry. Jewellers participating in the scheme may receive a commission of around 1% for their role in mobilising the gold.
Why Is This Being Considered Now?
The primary motivation is economic. Indian households and temples are estimated to hold between 25,000 and 30,000 tonnes of gold, a vast, untapped resource. Meanwhile, the country relies heavily on expensive imports to meet the demand of its massive jewellery industry. In the 2026 financial year, India's gold import bill hit a record $71.9 billion. By bringing even a fraction of the idle household gold into circulation, the government hopes to reduce this dependence on imports, which would ease pressure on the country's trade deficit. The original Gold Monetisation Scheme, launched in 2015, has had limited success, mobilising only around 39 tonnes in over a decade—a tiny fraction of the total estimated holdings. The government believes that involving trusted jewellers could be the key to finally unlocking this idle wealth.
How It Would Work for Households
Under the proposed revamp, an individual could take their unused gold jewellery, coins, or bars to a participating local jeweller. The jeweller would act as a collection agent, handling the initial assessment and deposit process. From there, the gold would be sent to a secure Collection and Purity Testing Centre (CPTC) where it is melted and its purity is precisely verified. Once tested, the equivalent weight in 995-fineness gold is credited to a Gold Deposit Account opened in the owner's name with a bank. The depositor would then start earning interest on this account, turning a non-earning asset into a productive one. At the end of the deposit term, the owner would typically have the option to receive their principal back either in the form of gold bars or the equivalent value in rupees.
The Key Hurdle: Trust and Emotion
The biggest challenge for any gold monetisation scheme in India is overcoming deep-seated cultural and emotional attachments to physical gold. For many families, jewellery is not just an investment but a store of sentimental value, often passed down through generations as heirlooms. The fact that jewellery deposited under the scheme is melted down and loses its original form is a major deterrent for many potential depositors. The previous scheme's limited success was partly due to a reluctance to hand over precious family assets to banks. The government is betting that the established relationship of trust between families and their local jewellers can help bridge this gap. However, success will ultimately depend on whether households feel their asset is being valued fairly and handled transparently throughout the entire process.
Potential Benefits and Lingering Questions
For individuals, the primary benefit is the ability to earn interest on an asset that would otherwise sit idle, while also saving on locker fees. The interest earned and capital gains on the value appreciation are also exempt from tax under the scheme's provisions. For the broader economy, a successful scheme would reduce import dependency, create a formal, domestic source of gold for jewellers, and channel vast private savings into the productive economy. However, questions remain. The medium and long-term deposit options of the original GMS were discontinued in March 2025, leaving only short-term deposits active at the discretion of banks. It is unclear what tenures the revamped scheme will prioritise. The logistics of ensuring transparency and security across thousands of jewellery stores will also be a complex undertaking. Official announcements confirming the final details are expected soon, possibly before the upcoming festive season.
