The Central government is expected to announce a revamped gold monetisation scheme, according to sources aware of the matter. The official announcement is expected within the next two weeks.

Under the proposed framework, jewellers across the country may be included as Collection Partners in the revamped Gold Monetisation Scheme (GMS), enabling them to aggregate household gold deposits. Earlier, only banks were allowed.

“Under the proposed framework, jewellers across the country may be included as Collection Partners in the revamped Gold Monetisation Scheme (GMS), enabling them to aggregate household gold deposits,” said All India Gem & Jewellery Domestic Council (AIJGF).

India's goldsmith and jewellery bodies have urged the government to revamp the Gold Monetisation Scheme, as they seek structural solutions to reduce gold inflows, without impacting the domestic demand or livelihoods tied to the sector. Even if five percent of Indian household gold is monetised, it could lead to liquidity of up to $90 billion, said analysts.

The move comes after Prime Minister Narendra Modi issued a call to citizens, asking them to defer their gold purchases for a year. However, gems and jewellery bodies have asked for a revamped Gold Monetization Scheme (GMS).

India is one of the largest purchasers of gold across the world, the yellow-metal acts as a store of value, while also being used for ornamental purposes. However, industry bodies suggested that this has led to "ideal gold." Therefore, immense value can be unlocked through a redefined and regulated Gold Monetisation Scheme.

Introduced in 2015, the GMS was introduced to trim the current account deficit by curbing gold imports. It encouraged investors to purchase the gold scheme, instead of buying physical gold. Investors could deposit their gold in bank lockers and earn interest (between 2.25 percent and 2.5 percent) on their gold depending on the duration of their deposit.

At the time of withdrawal, for short-term deposits, withdrawals in the form of either physical gold or the rupee-equivalent value were allowed.

By March 2025, after a decade, only 38 tonnes were monetised, which is on the lower side, when compared to India's estimated gold holdings of 25,000 tonnes. Further, at the same time, the government discontinued medium-term and long-term deposits.

The failure of the scheme was the result of the mounting losses in terms of interest which was borne by the exchequer. "Ultimately, the government was making a loss on the Scheme. They had to pay any appreciation cost, as well as two percent annual interest, to incentivise investors," said Bhavik Patel, Tradebulls Securities. The Scheme was not hedged, leading to the government bearing the appreciation costs at the time of withdrawal.

Additionally, in an industry body’s view, GMS also failed due to structural reasons. Indian families do not want to melt emotional and inherited jewellery for a small return as old ornaments carry family memory, religious value and social importance.

There is also a fear of tax scrutiny and documentation-related questions on old household gold. "Banks have limited incentive to push the scheme aggressively because gold deposits do not provide enough commercial benefit or balance-sheet advantage," added AIJGF.

Aamir Makda, Choice Broking suggested that if such a scheme successfully mobilizes even five percent of India’s private gold holdings, which would be around 1,250 tonnes, it would be equivalent to $80 to $90 billion in internal liquidity.

Theoretically, it could zero out India’s gold imports for nearly two years, drastically reducing the demand for US Dollars and potentially causing the Rupee to appreciate significantly.

Experts have also stated a revamped GMS could lead to the reduction of import dependence, while also strengthening the formal gold economy. It could also convert idle gold into "productive national capital."

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.