Government Plans Fresh Changes to Gold Monetisation Scheme
The Centre is exploring a revised framework for the Gold Monetisation Scheme to improve participation after the earlier version generated limited response.
As per the Moneycontrol report, the proposed changes would allow jewellers to serve as authorised collection partners for gold deposits. This would mark a significant departure from the earlier model, under which banks and designated collection centres handled the deposit process.
The government expects the wider presence of jewellers across the country to make the scheme more convenient for households interested in monetising idle gold.
How the Gold Monetisation Scheme Works
The Gold Monetisation Scheme was introduced to encourage individuals and institutions to deposit unused gold into the formal financial system.
Under the scheme, deposited gold undergoes purity verification before being accepted. Depositors receive interest based on the value of their gold holdings, while the collected gold can be utilised by banks for lending, sale, or reserve management.
By mobilising domestic gold, the government aims to reduce India’s dependence on imported bullion, which accounts for a significant portion of the country’s import bill.
The proposed framework is expected to retain banks as an integral part of the system while simplifying the collection process through jeweller participation.
Trust Continues to Be a Major Challenge
While operational improvements may make the scheme more accessible, officials believe that public confidence remains one of the biggest obstacles.
According to Moneycontrol, many households continue to hesitate before depositing their gold because of concerns over possible tax scrutiny once their holdings enter the formal financial system.
Officials reportedly indicated that fears regarding questions about ownership, source of funds, and tax compliance discourage many people from participating voluntarily.
The report also noted that households generally have more frequent interactions with jewellers than with banks for gold-related transactions, making jewellers a potentially effective channel for expanding the scheme’s reach.
Why the Earlier Scheme Attracted Limited Participation
The government had already scaled back the original Gold Monetisation Scheme in March 2025 after reviewing its overall performance.
Medium-term and long-term deposit options were discontinued, while only short-term bank deposit schemes remained available. Existing deposits, however, continued until their respective maturity dates.
According to the report, several operational hurdles limited public participation, including:
- Mandatory visits to designated collection and hallmarking centres.
- Melting or purity testing of jewellery before deposits.
- Extensive Know Your Customer (KYC) documentation.
- Requirement to open gold deposit accounts through designated banks.
These procedures made the process lengthy and less attractive for many potential participants.
Gold Mobilisation Remains Well Below Potential
The Gold Monetisation Scheme was launched in 2015 with the objective of bringing idle household gold into productive use.
According to official data cited by Moneycontrol, the scheme had mobilised approximately 39 tonnes of gold by November 2025.
This remains relatively small when compared with India’s estimated household gold holdings of around 25,000 to 30,000 tonnes, indicating substantial untapped potential.
The earlier scheme provided multiple deposit options, including:
- Short-term bank deposits ranging from one to three years.
- Government-backed medium-term deposits.
- Government-backed long-term deposits.
Depositors earned interest calculated on the quantity of gold deposited and could choose to receive either cash or an equivalent quantity of gold upon maturity.
Why Mobilising Domestic Gold Is Important
Increasing domestic gold mobilisation remains an important policy objective for the government.
India is among the world’s largest consumers of gold and continues to rely heavily on imports to meet domestic demand. Higher imports contribute significantly to the country’s current account deficit.
According to the Moneycontrol report:
- Gold imports increased by around 24.1% to US$72 billion during FY26, compared with US$58 billion in the previous financial year.
- Imports during April and May 2026 continued to rise despite higher import duties.
- Under HS Code 7108, gold imports increased by approximately 108.1%, rising from US$34.6 billion in FY21 to US$72 billion in FY26.
- Domestic gold prices remained elevated, trading near ₹1.47 lakh per 10 grams, reflecting continued demand.
Officials believe that greater mobilisation of existing household gold could improve domestic availability and gradually reduce dependence on imported bullion.
Jewellers Could Play a Larger Role
The proposed inclusion of jewellers is expected to make the scheme more accessible to the general public.
As trusted intermediaries in gold purchases, sales, and exchanges, jewellers interact with customers more frequently than banks for precious metal transactions.
Their participation could simplify collection, improve convenience, and potentially increase awareness of the scheme among households that may have previously found the process cumbersome.
Conclusion
According to the Moneycontrol report, the government is evaluating significant reforms to the Gold Monetisation Scheme by allowing jewellers to participate as collection partners alongside banks. The proposed changes aim to simplify gold deposits and encourage wider participation. While easier access may improve the scheme’s reach, officials acknowledge that addressing public concerns regarding tax compliance and building greater trust will remain essential to unlocking India’s vast stock of idle household gold.
Summary
The Central Government is reportedly considering major changes to the Gold Monetisation Scheme (GMS) by allowing jewellers to participate as collection partners. According to a Moneycontrol report, the proposed revamp aims to simplify the process of depositing idle gold and encourage greater public participation. By leveraging jewellers’ extensive retail presence and long-standing customer relationships, the government hopes to mobilise a larger share of India’s vast household gold reserves. The proposed reforms are also intended to reduce the country’s dependence on imported gold while making the scheme more accessible to households.
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