New Delhi |: The Central Government is planning a major overhaul of the Gold Monetisation Scheme (GMS) by allowing jewellery retailers to participate directly in collecting unused household gold. The proposed reform aims to unlock thousands of tonnes of idle gold lying in Indian homes and bring it into the formal financial system, reducing the country’s dependence on imported bullion.
The proposal is currently under discussion among the Ministry of Finance, the Reserve Bank of India (RBI), commercial banks, and representatives of the gold and jewellery industry. According to reports, the revised scheme could be announced before the upcoming festive season, although no official announcement has been made yet.
Government Eyes India’s Massive Idle Gold Reserves
India is estimated to have nearly 30,000 tonnes of gold stored in households, making Indian families among the world’s largest holders of physical gold. Most of this gold remains unused in lockers or homes, generating no financial returns while the country continues to rely heavily on expensive gold imports.
The government’s objective is to channel a portion of this dormant wealth into the formal economy, creating a domestic bullion supply and reducing pressure on the country’s import bill.
Why the Gold Monetisation Scheme Needs a Revamp
The Gold Monetisation Scheme was launched in 2015 to encourage individuals and institutions to deposit unused gold with banks instead of keeping it idle.
However, the scheme has seen limited success, mobilising only about 39 tonnes of gold over the past 11 years—a tiny fraction of India’s estimated household gold holdings.
Officials believe the main reasons for poor participation include:
- Limited public awareness
- Trust issues with banks and testing centres
- Complex deposit procedures
- Emotional attachment to family jewellery
- Concerns over melting ornaments
Jewellers Could Become Collection Centres
Under the proposed reforms, trusted local jewellers may be authorised to collect and aggregate gold from households before transferring it to approved refiners and banks.
The move is expected to make the scheme more accessible because jewellers already have long-standing relationships with customers and possess expertise in evaluating gold.
The proposed system would require complete traceability, transparency, and regulatory oversight throughout the collection and processing stages.
How the Existing Gold Deposit Process Works
Currently, individuals wishing to deposit gold must visit an Authorised Collection and Purity Testing Centre (CPTC).
The process includes:
- Testing the purity of the deposited gold.
- Obtaining the customer’s consent before melting the jewellery.
- Converting the gold into 995 purity bullion.
- Crediting the equivalent quantity into a Gold Deposit Account maintained with a participating bank.
Depositors receive interest in Indian Rupees, while the principal amount can be redeemed either in gold or in its cash equivalent, depending on the terms of the deposit.
At present:
- Minimum deposit: 10 grams of raw gold.
- Maximum deposit: No upper limit.
- Only the Short-Term Bank Deposit Scheme (1–3 years) remains operational after the discontinuation of medium- and long-term government deposit options in March 2025.
Jewellers May Receive Service Fees
The proposed framework also includes financial incentives for participating jewellers.
They may receive service or handling fees for:
- Collecting household gold.
- Conducting initial purity assessments.
- Processing customer documentation.
- Facilitating transfers between customers, refiners, and banks.
The arrangement could create new business opportunities for jewellers while improving customer convenience.
Benefits for the Jewellery Industry
The proposed changes could also benefit India’s jewellery sector.
Gold mobilised domestically could provide jewellers with an alternative source of bullion, helping them:
- Reduce dependence on imported gold.
- Lower financing costs.
- Improve inventory management.
- Ensure a more stable supply of raw material.
Reducing India’s Dependence on Gold Imports
India remains one of the world’s largest importers of gold, with imports significantly affecting the country’s trade deficit and foreign exchange outflow.
Rising international gold prices and import duties have increased jewellery costs, affecting both consumers and manufacturers.
By recycling existing domestic gold, the government hopes to:
- Reduce bullion imports.
- Strengthen India’s domestic gold ecosystem.
- Improve resource efficiency.
- Support economic stability.
Success Depends on Public Participation
Despite the proposed reforms, experts believe the success of the revamped Gold Monetisation Scheme will ultimately depend on whether households are willing to part with their jewellery and other gold holdings for melting and conversion into bank deposits.
Since many Indian families view gold as both an emotional asset and a long-term store of wealth, building public trust and ensuring a transparent process will be crucial to the scheme’s success.
Looking Ahead
If implemented, the revised Gold Monetisation Scheme could mark a significant shift in India’s bullion market by integrating trusted jewellers into the formal gold collection network. The initiative has the potential to unlock billions of dollars’ worth of idle household gold, reduce import dependence, strengthen the domestic bullion supply chain, and contribute to the country’s broader economic and financial objectives.
