What is the Gold Monetisation Scheme?
Launched in 2015, the Gold Monetisation Scheme (GMS) was designed to pull a vast, hidden treasure into the formal economy. Indian households and temples are estimated to hold somewhere between 25,000 and 34,600 tonnes of gold. The GMS aimed to mobilise
this idle metal, allowing people to deposit their unused gold with banks, earn interest, and help reduce the country's massive gold import bill. In theory, the gold is tested for purity, melted down, and credited to a metal account, which then earns a yield for the owner. This would turn a non-productive asset into an interest-bearing one, while supplying domestic gold to the jewellery industry.
A Grand Plan with a Modest Reality
Despite its ambitious goals, the scheme has largely underperformed. Since its launch over a decade ago, it has only managed to collect around 39 tonnes of gold—a tiny fraction, just 0.16%, of the lowest household stock estimates. The reasons for this lukewarm response are multifaceted. Many families were reluctant to part with ancestral jewellery that holds deep sentimental value, especially since the process requires melting it down. Logistical hurdles, a limited number of collection centres, cumbersome paperwork, and a general lack of trust in the bank-led process also proved to be major barriers. In fact, the scheme's performance was so tepid that the government discontinued new deposits for the Medium and Long-Term components in March 2025, leaving only the Short-Term Bank Deposit option active.
The Revamp: Bringing Jewellers into the Fold
The government's new plan hinges on a simple but potentially transformative idea: involve local jewellers. For generations, the family jeweller has been the primary point of contact for buying, selling, and exchanging gold in India. The proposed revamp would position these jewellers as collection and mobilisation agents. Instead of navigating a formal banking process, customers could go to their trusted local jeweller to deposit gold into the scheme. The jeweller would handle the initial collection and preliminary purity checks before passing the gold to certified refiners and banks. This approach leverages the pre-existing relationship of trust and convenience that jewellers have with their communities.
Why This Change Could Work
Involving jewellers addresses the core failures of the original model. It dramatically expands the network of collection points, making the scheme far more accessible. To incentivise their participation, reports suggest that jewellers could earn a commission, potentially around 0.75% to 1% of the value of the gold they collect. This provides a direct business reason for them to promote the scheme. From an economic standpoint, successfully mobilising even a small percentage of India's idle gold would have a huge impact. It would increase the domestic supply of gold for the jewellery industry, potentially reducing the reliance on costly imports, which hit a staggering $71.98 billion in FY26.
What It Means for Gold Owners
For individuals and families holding gold, this revamp could finally make monetisation an attractive option. The convenience of dealing with a familiar local jeweller instead of a bank could remove a significant psychological and logistical barrier. It offers a formal, government-backed way to earn a yield on an asset that otherwise just incurs storage costs. However, the core condition remains: the gold, including sentimental jewellery, must be melted down and converted into standard bars. While the new model aims to build trust through the jeweller, overcoming the emotional attachment to family heirlooms will remain the scheme's ultimate challenge. Concerns around documentation and potential tax scrutiny on long-held family gold also need to be addressed clearly for the plan to see widespread success.
