Why Revamp an Existing Scheme?
The original Gold Monetisation Scheme (GMS), launched in 2015, was designed to mobilise the country's vast, idle gold reserves, estimated to be around 25,000 tonnes. The goal was simple: encourage households to deposit unused gold, earn interest, and
reduce India's reliance on expensive imports. However, the scheme saw limited success, mobilising only about 39 tonnes in over a decade. Most of the original scheme's components were discontinued in March 2025 due to the low uptake, leaving only a short-term deposit option active at the discretion of individual banks. The government now believes a new approach is needed, one that addresses the practical and emotional barriers that kept people away.
The Jeweller Is the New Bank
The cornerstone of the proposed new scheme is bringing local jewellers into the process. For generations, the neighbourhood jeweller, not the bank, has been the trusted point of contact for buying, selling, and exchanging gold. The plan is to allow jewellers to act as collection and purity testing centres. Customers could deposit their old jewellery with a trusted local business, which would then handle the process of sending it to authorised refiners and banks. This shift acknowledges that trust is a major hurdle. Many families were hesitant to hand over heirlooms to a formal banking system for a process that involves melting the jewellery down.
What's in It for You?
For the consumer, the primary benefit is turning a non-earning asset into an income-generating one, all while maintaining its value. Instead of paying for a locker, your gold could earn interest for you. The interest earned and capital gains under the existing GMS framework are exempt from tax, a feature that is expected to continue. Upon maturity, depositors typically have the option to receive their principal back as either physical gold (in the form of bars or coins) or the equivalent cash value at prevailing market rates. The new proposal aims to make this entire process more accessible and seamless by leveraging the existing network of jewellers across the country.
Potential Benefits for the Broader Economy
Mobilising even a fraction of India's household gold could have a significant economic impact. In fiscal year 2026, India's gold import bill surged to a record $71.9 billion, even though the volume of imports slightly decreased. This was driven by soaring global gold prices. By sourcing gold domestically through the revamped scheme, the country could reduce its import bill, which would ease pressure on the current account deficit and the rupee. This domestically sourced gold could then be used as raw material by the jewellery industry, potentially lowering their costs and making the entire sector more self-reliant.
Hurdles and Lingering Questions
Despite the promise of convenience, challenges remain. The most significant is the sentimental value attached to jewellery. Once deposited, an ornament is melted and cannot be returned in its original form. This emotional barrier is a major reason why many families prefer to keep their gold at home, regardless of the financial incentive. Furthermore, the final details of the scheme are yet to be announced. The interest rates offered will need to be attractive enough to persuade depositors. For jewellers to participate enthusiastically, the proposed commission—reported to be around 0.75% to 1%—must be finalised and seen as worthwhile. The success of this ambitious relaunch will depend on getting these details right.
