The Challenge of Idle Gold
Indian households and temple trusts are estimated to hold between 25,000 and 34,600 tonnes of gold, a private fortune worth trillions of dollars. This vast reserve, however, mostly remains unproductive, locked away as jewellery and bars. Simultaneously,
the country's jewellery industry relies heavily on imports to meet its demand. This creates a significant economic challenge. In the fiscal year 2026, India's gold import bill reached a record $71.98 billion. This happened even though the volume of gold imported was slightly less than the previous year, highlighting the impact of rising global prices. The core objective of government gold schemes is to bridge this gap: to mobilise the massive stock of gold already in the country, make it available to the jewellery industry, and thereby reduce the expensive reliance on imports.
A Look Back at the 2015 Scheme
The government's primary attempt to address this was the Gold Monetisation Scheme (GMS), launched in 2015. The idea was simple: encourage people and institutions to deposit their idle gold with banks and earn interest, much like a fixed deposit. The deposited gold would then be melted, refined, and lent to jewellers, creating a domestic supply chain. However, the scheme has had limited success. In the nearly eleven years since its launch, the GMS has mobilised only about 39 tonnes of gold. This represents a tiny fraction—less than 0.2%—of the total estimated household gold stock. The reasons for the low uptake include a lack of trust in parting with inherited jewellery, logistical hurdles like getting gold to certified purity testing centres, and a general disconnect between how people view gold (as a family treasure) and how banks treated it (as a financial instrument).
What Does the New Proposal Entail?
The revamped plan, which is reportedly under serious consideration, introduces a fundamental change: bringing local jewellers into the process. Under the proposed model, jewellers would act as collection and aggregation points for the scheme. Instead of customers going to a bank or a designated testing centre, they could go to their trusted family jeweller. These jewellers would handle the initial collection, conduct purity assessments, and route the gold to authorised refiners and banks, ensuring transparency throughout the process. This approach acknowledges that for many Indians, the local jeweller is a more trusted and accessible entity for gold-related transactions than a formal banking institution.
Key Differences and Potential Upgrades
The central improvement in the new proposal is leveraging the trust and reach of jewellers. For their role, participating jewellers are expected to receive a service fee or handling commission, potentially around 0.75% to 1% of the gold's value. This provides them with a direct incentive to promote the scheme. For customers, the convenience and trust factor is the main upgrade. For the jewellery industry, access to this monetised domestic gold could provide a more reliable and potentially lower-cost source of raw material, reducing their dependence on volatile import markets and lowering financing costs. The government's push to roll out the revamped scheme before the upcoming festive season suggests an urgency to curb the import bill and support the domestic jewellery sector.
Hurdles on the Path to Success
Despite the promising changes, success is not guaranteed. The emotional and cultural attachment to gold, especially inherited jewellery, remains a powerful barrier. Many families are unwilling to have their ornaments melted down, regardless of the financial incentive. Building a foolproof system that ensures complete transparency and traceability from the jeweller to the refiner and bank will be critical to building depositor confidence. The logistical costs of insuring, transporting, and processing the gold also remain a factor that made the original scheme unattractive for some banks. Ultimately, the success of this revamped plan will depend on whether it can overcome a deep-seated cultural mindset and prove to be a trustworthy and convenient alternative to a home locker.
