Gold Monetisation Scheme: Gold lying idle in home lockers may soon start earning like a bank deposit, as the government prepares a revamped version of the scheme to unlock household wealth.
Speaking to Zee Business, Subhash Chandra Garg said earlier gold schemes were expensive for the government and need better design. Bullion expert Surendra Mehta noted that the previous scheme struggled because people were reluctant to have their jewellery melted, suggesting a shift towards market-linked mechanisms. Meanwhile, former R K Takkar highlighted that while banks enjoy strong public trust, operational hurdles such as purity testing still need to be addressed.
With Indian households estimated to hold over 20,000 tonnes of gold, the move aims to bring this vast, underutilised asset into the formal economy. The renewed push comes at a time when rising gold imports continue to strain foreign exchange reserves and pressure the rupee – making the case for using existing gold instead of buying more from abroad.
Earn from idle gold: How the scheme works?
The scheme allows individuals to deposit gold – including coins, bars and even jewellery – with banks. In return:
- You earn annual interest, currently around 2 to 2.5 per cent
- The deposit works similar to a fixed deposit
- At maturity, you get back the value in gold or cash
The scheme is voluntary and designed for those who want to make idle gold productive.
20,000 tonnes gold: Why it matters for India?
India is one of the largest importers of gold, paying for it in dollars. This increases:
- Import bills
- Dollar outflow
- Pressure on the rupee
If even a small portion of household gold enters the system, it can reduce import dependence and support currency stability.
GMS revamp: What may change this time?
The earlier version of GMS failed to attract large participation. The revamp focuses on fixing those gaps. The likely changes include:
- Better returns to attract investors
- Simpler processes through banks
- More flexibility in deposits
- Possible clarity on tax treatment
The aim is to make the scheme easier and more appealing for ordinary households.
GJC proposes jeweller-led plan to unlock idle gold
As part of ongoing discussions, the All India Gems and Jewellery Domestic Council (GJC) has held consultations with the Reserve Bank of India and the Finance Ministry on revamping the Gold Monetisation Scheme.
The industry body has submitted a jeweller-integrated framework after consultations across banking, refining and jewellery sectors. The proposal focuses on bringing gold into the financial system as a dematerialised balance, instead of relying only on physical deposits.
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The model aims to cover bullion, coins and jewellery, reflecting the recent rise in investment demand for these formats. It also seeks to enable investors to earn returns on idle gold without selling it, turning it into an interest-generating asset.
A key feature is an end-to-end digital system from deposit to credit with tracking and audit trails across the gold value chain. The proposal also highlights KYC, consent-based participation and regulatory oversight to ensure transparency and accountability.
The broader aim is to create a secure and auditable gold monetisation ecosystem, while reducing India’s dependence on imports by mobilising idle domestic gold.
Coins, bars trend: A big shift in gold buying
There has been a clear shift in how Indians buy gold.
In 2025, about 280 tonnes of gold was bought for investment, mainly as coins and bars. Unlike jewellery, these forms are easier to deposit because they carry less emotional value.
This trend could play a key role in improving participation in the revamped scheme.
Why Gold Monetisation Scheme struggled in the past
The previous Gold Monetisation Scheme struggled for several reasons.
Jewellery had to be melted, which discouraged families. Emotional attachment to gold remained a strong barrier. Returns were modest, and awareness was limited.
As a result, by March 2025, only around 38 tonnes of gold had been mobilised.
Key concerns: Jewellery, tax, purity issues
Even with improvements, some issues remain.
Many households are uncomfortable depositing jewellery due to emotional value. Purity testing and technical processes can be complicated. There are also concerns about income tax scrutiny, especially for inherited gold without formal records.
Unless these concerns are addressed, participation may stay limited.
What experts say about the plan
Former Finance Secretary Subhash Chandra Garg has said earlier gold schemes were expensive for the government and need better design. Bullion expert Surendra Mehta believes the earlier scheme failed because people did not want their jewellery melted, and suggests linking it to market-based systems. Former UCO Bank MD R K Takkar has highlighted that while banks enjoy trust, operational challenges like purity checks need solutions.
Benefits explained: Income, safety, flexibility
For individuals, the benefits are straightforward.
Idle gold starts generating income. Storage risks reduce as gold moves into banks. The structure is similar to a fixed deposit, offering predictable returns.
However, the deposited jewellery is melted, and the same pieces are not returned.