Gold Monetisation Scheme Set for a Possible Revamp as Government Looks to Unlock India’s Idle Gold
The Government of India is considering a revamped version of the Gold Monetisation Scheme (GMS) as it seeks to bring a much larger share of the gold held by Indian households into the formal financial system. The move assumes greater importance as India continues to face strong domestic demand for gold and substantial dependence on imported bullion. Recent reports indicate that the government is examining ways to make the scheme more attractive and operationally efficient, including a possible role for jewellers.
The Gold Monetisation Scheme was originally launched in 2015 with a clear economic objective: mobilise gold lying idle with households and institutions, put it to productive use and, over the longer term, reduce India’s dependence on imported gold. Under the mechanism, eligible depositors can place gold with participating banks after purity testing and receive a deposit certificate denominated in gold.
The renewed focus comes against the backdrop of the enormous quantity of gold estimated to be held by Indian households. Recent government discussions have reportedly centred on tapping an estimated 30,000 tonnes of privately held gold. Much of this wealth remains in the form of jewellery, coins and other physical holdings rather than being deployed through the financial system.
A major potential change under consideration is greater participation by jewellers. Bringing jewellers into the structure could make the scheme easier for consumers to access because households already interact with jewellers when purchasing, exchanging or selling gold. The government hopes such a channel could improve gold mobilisation while strengthening the connection between household gold deposits, refiners, banks and the jewellery industry.
The need to make the scheme more effective has become particularly evident after the government discontinued the Medium Term Government Deposit and Long Term Government Deposit components from March 26, 2025. The decision followed an assessment of the scheme’s performance and changing market conditions. The Short Term Bank Deposit component remains part of the current framework.
Under the current rules, Short Term Bank Deposits can have a tenure of one to three years, with the interest rate determined by the participating bank. This is different from the earlier government-deposit structure, where fixed rates of 2.25% per annum for medium-term deposits and 2.50% for long-term deposits had applied before those components were discontinued.
The mechanics of monetisation are relatively straightforward. Gold deposited under the scheme is tested for purity at authorised collection and purity testing centres and can then be sent to refiners. After refining, the gold can enter the financial and jewellery ecosystem rather than remaining locked away in household lockers.
For the depositor, the important distinction is that this is not simply a conventional rupee fixed deposit. The deposit is linked to the quantity and value of gold placed into the scheme. For eligible short-term deposits, redemption can involve receiving the equivalent value in rupees or, subject to the applicable terms, receiving gold of the deposited weight.
The economic argument behind the scheme is significant. If even a relatively small portion of India’s privately held gold is mobilised, it could create an additional domestic source of bullion for the jewellery industry and potentially reduce the need to import equivalent quantities. That could help reduce pressure on the country’s merchandise trade balance and foreign-exchange outflows.
However, the scheme has historically faced a basic challenge: households often attach emotional and cultural value to their jewellery. For many families, gold is not merely an investment asset but also a form of inheritance, social security and wealth preservation. Melting jewellery and surrendering physical possession therefore involves a psychological cost that interest income alone may not overcome.
The proposed revamp is consequently important because the success of GMS depends less on the availability of gold and more on whether households find the financial proposition attractive enough to part with physical possession. A simpler process, greater participation by trusted jewellers and clearer returns could potentially address some of these barriers.
The latest government information confirms that the GMS remains an active policy framework, with the Department of Economic Affairs updating its official scheme information as recently as August 27, 2026. The government continues to describe the central objective as mobilising idle gold and reducing India’s long-term dependence on imports.
The renewed debate over gold mobilisation also comes at a time when gold has become increasingly important in India’s financial landscape. Gold-backed lending has expanded rapidly, with Reuters reporting that gold loans increased sharply in 2026 as banks and financial institutions responded to strong borrower demand. This broader financialisation of gold could provide an additional backdrop for policymakers seeking to bring physical gold into more productive economic channels.
For the government, the ultimate objective is therefore bigger than creating another deposit product. A successful Gold Monetisation Scheme could transform a portion of India’s enormous stock of privately held gold from dormant household wealth into an active financial resource. For households, however, the decision will depend on whether the revamped system can offer sufficient returns, convenience, transparency and confidence without undermining the traditional role of gold as a store of wealth.
At present, the reported revamp is a policy proposal rather than a fully operational replacement scheme. The existing official framework should therefore be distinguished from proposals being examined by the government. Any new eligibility rules, jeweller participation, interest structure or redemption provisions would need to be formally notified before becoming applicable.
If implemented effectively, the next version of the Gold Monetisation Scheme could become an important component of India’s broader strategy to reduce gold import dependence. The real test, however, will be whether policymakers can turn India’s cultural affinity for gold into a financial advantage—without asking households to give up the security and trust that have made physical gold one of the country’s most enduring stores of wealth.
