The Trillion-Dollar Question
Indian households and temple trusts hold an astonishing amount of gold, with estimates ranging from 25,000 to over 34,000 tonnes. At current prices, that's a fortune worth trillions of dollars, largely sitting idle in lockers and jewellery boxes. From
an economic perspective, this represents a massive, untapped resource. The government's goal with the Gold Monetisation Scheme (GMS), first launched in 2015, has been to coax this metal out of homes and into the financial system. The logic is compelling: mobilising even a fraction of this gold could reduce the country's reliance on expensive imports, which cost nearly $72 billion in fiscal year 2026 alone, and put a dormant asset to productive use.
An Ambitious Plan's Slow Start
The original scheme allowed individuals to deposit their gold with banks and earn interest, much like a regular fixed deposit. At maturity, they could receive their holdings back as either cash or physical gold. However, the plan never quite took off. In over a decade, the GMS has mobilised only about 39 tonnes of gold — a tiny fraction of the total estimated holdings. The reasons are a complex mix of logistical hurdles and deep-seated cultural sentiments. Many found the process cumbersome, involving visits to specific centres for purity testing and melting down cherished ornaments. For many families, jewellery holds emotional and ancestral value that cannot be replaced by a standard gold bar, making the idea of melting it a non-starter.
A New Strategy: Involving the Jeweller
Recognising these roadblocks, the government is now shaping a significant revamp of the scheme. The core of the new proposal is to bring local jewellers into the process as collection partners. Instead of dealing with banks, which many customers found impersonal and intimidating for gold transactions, people could go to their trusted family jeweller. Under the proposed plan, jewellers would act as the front-end, collecting gold from customers before passing it on to refiners and banks. To incentivise their participation, industry bodies have proposed a commission for jewellers, potentially around 0.75% to 1% of the value of the gold they collect. This shift acknowledges a simple truth: for generations, the jeweller, not the bank, has been the primary point of contact for all things gold in India.
Will This Time Be Different?
The proposed changes are a pragmatic admission that the previous model failed to account for the crucial element of trust. While banks are trusted with money, gold is a different matter. By placing the familiar local jeweller at the heart of the transaction, the government hopes to bridge this trust deficit. However, challenges remain. The fundamental proposition of asking people to part with physical, often sentimental, jewellery for melting still exists. Furthermore, concerns about potential tax scrutiny have also been a major deterrent for many households, an issue that operational tweaks alone may not solve. The government has already scaled back the scheme, discontinuing the medium and long-term deposit options in March 2025 due to poor performance, leaving only short-term deposits active.
