The Indian government's latest attempt to revive the Gold Monetisation Scheme (GMS) is built around a simple premise: make it easier for households to deposit gold. But sources acknowledge that the scheme's biggest hurdle has never been convenience. it has been trust.
The Centre is expected to unveil a revamped Gold Monetisation Scheme, allowing jewellers to act as collection partners for the first time. The move marks a significant departure from the earlier bank-led model, with policymakers hoping jewellers' retail presence and customer relationships will encourage more households to bring idle gold into the formal financial system.
However, conversations with multiple sources suggest the redesign addresses only one part of the problem. While jewellers may simplify the collection process, finance ministry officials admit many households remain reluctant to monetise their gold because they fear tax scrutiny and questions over their holdings once they enter the formal system.
The Gold Monetisation Scheme allows individuals and institutions to deposit their idle gold with designated banks or collection centres after purity verification. Depositors earn interest on the value of gold or gold deposits, while the metal is pooled by banks for lending, sale, or reserve purposes, helping reduce reliance on imported bullion.
“The problem in mobilising household gold is that tax concerns arise and people worry that questions may be asked once they bring their gold into the formal system. People need to be comfortable that participating in the scheme will not expose them to unnecessary scrutiny. As a result, many households are reluctant to mobilise or declare their gold holdings. That remains one of the biggest challenges,” a government source told Moneycontrol.
Another source familiar with the discussions said the government's effort is to remove operational bottlenecks that held back the earlier scheme.
“Most households interact with jewellers far more frequently than with banks for gold-related transactions. Bringing jewellers into the ecosystem is expected to make participation easier and significantly improve the scheme's reach,” this source said.
What happened to the earlier scheme?
The government's latest push comes after it scaled back the original Gold Monetisation Scheme in March 2025, nearly a decade after its launch, discontinuing its medium- and long-term deposit components after reviewing performance and evolving market conditions.
Under the earlier framework, households could deposit raw gold (bars, coins, jewellery after melting or purity testing) at designated banks or collection centres, which was then converted into a gold deposit account in grams.
The scheme included short-term bank deposits and government-backed Gold Deposit Bonds, with deposited gold aggregated by banks for lending to jewellers or held as part of reserves.
While existing deposits were allowed to continue until maturity, only short-term bank deposits were retained, with medium- and long-term options discontinued due to low participation and operational complexity.
Since its launch in 2015, the Gold Monetisation Scheme mobilised around 39 tonnes of gold by November 2025, according to official data, negligible compared to India’s estimated 25,000–30,000 tonnes of household holdings.
The scheme offered short-term bank deposits of one to three years, alongside government-backed medium- and long-term deposit options. Depositors earned interest on the gram value of gold, with rates varying by tenure, and could opt for cash or gold equivalent redemption at maturity.
Sources say the earlier framework failed to gain scale because the collection process was cumbersome and participation remained limited.
The process required households to physically visit designated collection and hallmarking centres, have jewellery melted or assayed for purity, complete extensive KYC documentation, and then open specialised gold deposit accounts through banks.
“The earlier scheme has not achieved the desired scale because the process was perceived as cumbersome and participation remained limited. The revised framework seeks to simplify the collection process while preserving the role of banks and ensuring proper traceability of gold deposits,” the second source said.
Why the government wants India’s gold
Most of the world’s gold is held in jewellery, private savings, and central bank reserves. The United States has the largest official gold reserves at about 8,100 tonnes, followed by Germany, Italy, and France. China officially reports over 2,200 tonnes, though its total holdings may be higher.
The UAE holds relatively small reserves but is a major global hub for gold trade and re-export. Overall, central banks in Europe and the US hold large stockpiles, while countries like India and China have much larger shares of gold in private hands.
The government is therefore likely giving another shot at mobilising idle household gold to reduce import dependence and thereby easing pressure on the current account deficit.
India is estimated to hold nearly 30,000 tonnes of gold with households, much of it lying idle. At the same time, the country remains heavily dependent on imported bullion to meet domestic demand, making gold one of the country's largest inbound shipments.
Despite sharply increased import duties on gold in May 2026 to 15 percent from 6 percent to curb inbound shipments, India's appetite for the precious metal has remained resilient.
Gold imports rose to $72 billion in 2025–26 from $58 billion a year earlier, while imports in April and May 2026 continued to grow year-on-year despite higher duties. Under HS code 7108, imports of gold rose from $34.6 billion in FY21 to $72 billion in FY26, according to commerce ministry data.
Prices also remained near record highs at about Rs 1.47 lakh per 10 grams, further reflecting strong underlying demand.
“Mobilising domestic gold has multiple benefits. It can reduce dependence on imported bullion, improve the availability of gold within the country for productive use and help moderate pressure on the current account over the longer term,” the second source said.
Without addressing households' concerns about scrutiny, officials acknowledge that making the scheme more convenient may not be enough to unlock India's vast stock of idle gold.
As the government source acknowledged, “India has a very large stock of household gold, but a significant portion remains outside the formal financial system because people are hesitant to come forward. The challenge has always been to build trust and encourage voluntary participation while ensuring that the scheme remains transparent.”