Gold Monetisation Scheme 2.0: What It Means And Why Govt Is Considering A Jeweller-Led Revamp

The Centre is examining a fresh overhaul of the Gold Monetisation Scheme (GMS), with jewellers expected to play a much larger role in encouraging households to deposit idle gold into the formal financial system.

Currently under discussion, the proposal is aimed at improving participation in a scheme that has struggled to gain traction despite nearly a decade in operation.

The India Bullion and Jewellers Association (IBJA) has proposed allowing jewellers to collect gold from customers before transferring it to refiners, instead of banks handling the entire front-end process.

In return, jewellers could receive an incentive of around 0.75% to 1% of the value of the gold collected, with the final incentive to be decided by the government, as per a report by The Economic Times (ET). IBJA President Prithviraj Kothari said the incentive would encourage jewellers to actively promote the scheme among customers.

He argued that banks struggled to scale the earlier model because of limited manpower and inadequate customer outreach. Although the proposal is expected to move ahead, the rollout timeline remains uncertain because of possible political scrutiny, Kothari said, as per ET.

Discussions involving senior ministers, the Reserve Bank of India (RBI), banks and industry representatives have reportedly gained momentum ahead of the festive season.

Why Govt Wants India's Idle Gold

The proposed revamp comes as India continues to rely heavily on imported bullion despite holding one of the world's largest private stocks of gold.

The Ministry of Finance's Department of Economic Affairs said that the primary objective of the Gold Monetisation Scheme, launched in 2015, is to channel idle household and institutional gold into productive use while reducing India's dependence on imported gold over the long term.

Indian households are estimated to possess nearly 30,000 tonnes of gold, much of it lying idle, as per a report by Moneycontrol. Mobilising even a small portion of these holdings could reduce gold imports, improve domestic bullion availability and ease pressure on the country's current account deficit.

High gold prices and elevated import duties have weighed on jewellery demand, prompting renewed efforts to improve the scheme before the festive buying season. As of August 6, IBJA's indicative retail rate stood at ₹14,836 per gram for 24-carat (999) gold and ₹14,480 per gram for 22-carat gold, excluding GST and making charges.

What's GMS And Why It Struggled

The Gold Monetisation Scheme (GMS) was launched by the Centre in 2015 to mobilise idle gold held by households and institutions and channel it into productive use, thereby reducing India's dependence on imported bullion. The scheme combined the earlier Gold Deposit Scheme and Gold Metal Loan Scheme into a single framework.

Under the original framework, depositors could submit gold jewellery (after removing stones), coins or bars at authorised Collection and Purity Testing Centres (CPTCs).

After purity testing and refining, the equivalent quantity of 995-purity gold was credited to a Gold Deposit Account with a designated bank.

Depositors earned interest and, at maturity, could opt to receive either the equivalent quantity of gold or its rupee value, depending on the applicable scheme.

However, the scheme failed to attract widespread participation. Only around 39 tonnes of gold had been mobilised by November 2025 — a small fraction of India's estimated household holdings of 25,000-30,000 tonnes, as per Moneycontrol.

The reason has reportedly been attributed to the limited uptake to a lengthy collection process involving purity testing, melting of jewellery, extensive documentation and specialised gold deposit accounts, making participation cumbersome for many households.

What Do The Current Rules Say?

The scheme has already undergone significant changes.

As per RBI's updated Master Directions and the Finance Ministry, only the Short-Term Bank Deposit (STBD) option remains open for fresh deposits from March 26, 2025, while the medium- and long-term government deposit schemes have been discontinued for new mobilisation.

Existing deposits under those schemes, however, continue until maturity.

Resident Indians — including individuals, Hindu Undivided Families (HUFs), partnership firms, companies, trusts and certain government entities — are eligible to participate.

Deposits are accepted through authorised Collection and Purity Testing Centres (CPTCs) or recognised Gold Monetisation, Collection and Testing Agents (GMCTAs), which can include eligible jewellers and refiners. The minimum deposit is 10 grams of raw gold, with no upper limit.

For STBD deposits, the tenure ranges from one to three years, with interest determined by participating banks and paid in Indian rupees.

At maturity, depositors may receive either the rupee equivalent of the deposited gold or physical gold, depending on the option selected at the time of deposit.

Who Stands To Benefit?

If implemented, the proposed structure could benefit multiple stakeholders. Households would gain an additional avenue to earn returns on idle gold, while jewellers could receive a commission for facilitating collections and potentially strengthen customer engagement.

For banks, shifting customer-facing operations to jewellers could reduce operational bottlenecks while allowing them to continue managing deposit accounts.

At a broader level, greater mobilisation of domestic gold could reduce reliance on imports, improve the availability of bullion for lending to jewellers and help moderate pressure on India's import bill and current account deficit over time.

While the proposed jeweller-led model seeks to address the operational shortcomings of the earlier framework, its success will ultimately depend on whether it can inspire greater public confidence.

Trust Remains The Biggest Hurdle

While the proposed revamp focuses on simplifying collection through jewellers, officials believe operational ease alone may not be enough to revive the scheme.

Even with easier access and financial incentives, policymakers acknowledge that convincing households to voluntarily bring their gold into the formal system remains the scheme's biggest challenge.

According to a report by Moneycontrol, many households remain hesitant because they fear that bringing privately held gold into the formal financial system could invite tax scrutiny or questions regarding the source of their holdings. Officials cited these concerns as one of the principal reasons participation has remained subdued despite India's vast stock of household gold.