Indians are known to hold enormous amounts of gold in their personal capacities, passed down through generations as heirlooms. According to the India Bullion and Jewellers Association (IBJA), Indian households hold around 35,000 tonnes of gold, valued at Rs 415 trillion (around $4 trillion) as of June 2025. That’s approximately the size of India’s gross domestic product (GDP).

Yet households don’t earn interest on their vast holdings, the government cannot expand its asset base, and jewellers, who primarily import gold, cannot gain from India’s latent yellow wealth.

The government had hit upon the idea of monetising this gold in 2015. The scheme, Gold Monetisation Scheme (GMS), 2015 received such a low response that it was discontinued in 2024. The long- and medium-term deposits were discontinued.

It could only bring forth a mere 31 tonnes of gold in nine years – a pittance in a country which imports over 200 tonnes of gold annually.

Two years since the scheme went kaput, a lot has changed. The value of the rupee has fallen, gold prices shot up unabated in 2025 and are still in the sky zone in 2026.

Moreover, our import bill is swelling so much that the country’s Prime Minister Narendra Modi had to appeal to Indians to hold off gold buying right after the West Asia crisis.

Once again, a plan to revive the gold monetisation scheme is in the works – and is speaking to jewellers as collection points as opposed to only banks.

“Gold prices surged over 50% since 2024. Households are wealthier only on paper; mobilising this wealth has never been stronger. The structural imbalance signals an urgent need for a formal, market-driven gold ecosystem to channel this wealth productively,” said a report, ‘Unlocking India’s Gold’ by the IBJA.

The Crown Jewels

The former gold monetisation policy failed due to a lack of awareness, apart from deep distrust in the system. This time, the government aims for success by bringing jewellers, who carry a certain cachet with gold-buying Indians, on board.

The CEO of Senco Gold, Survankar Sen, believes that the new system must make it convenient for people to deposit gold.

“The involvement of jewellers, refiners and banks will be needed for the success of the programme. This action will make sure that idle gold lying in the economy will be best utilised. India has 30,000 tonnes of gold in households and as investments so even a 10% mobilisation will make our economy stronger in times of global crisis,” he told The Core.

Jewellers can add an edge to the marketing of the scheme as well as utilise the trust in the system.

“If you see, it’s not anything new. It’s very common for people in earlier times to buy small holdings of gold and keep it with the jewellers. Once they reach a target like a certain grammage, they convert it into a jewellery piece. That is the kind of trust local jewellers hold, and this can be optimised into a gold monetisation scheme which offers them interest on their gold holdings,” said Bhargava Vaidya, a gold expert and the proprietor of chartered accountancy firm B N Vaidya & Associates.

Experts are of the opinion that when it comes to gold purity, jewellers have an edge over banks — even as hallmarking centres were earlier introduced. Not only do Indians trust jewellers more, but they are more ‘reachable’ than banks.

Sanjiv Arole, a market expert on gold, believes that for the scheme to work well, it has to seep deep into the system.

While jewellers may be closer to the gold selling and buying ecosystem than banks, the key to reaching the critical mass could be NBFCs and not necessarily banks. A case in point is how much gold NBFCs hold as collateral.

“In Kerala, NBFCs reportedly hold about 381 tonnes of gold as collateral, valued at over Rs.4.6 lakh crore, exceeding the official gold reserves of several European countries. An effective gold monetisation strategy should leverage NBFC networks to mobilise privately held gold, rather than assume household gold remains permanently locked away,” Arole says.

Jewellers and other intermediaries could act as banking correspondents do for other financial products, and receive incentives for the same.

Will India Give Up Its Gold?

Even if the government solves one roadblock of easing the pathway to deposit gold – the question still remains – will Indians actually deposit gold?

Most Indians hold jewellery as an adornment as well as an investment, and few families would not part with it unless they encounter an insurmountable obstacle, which is why most Indians prefer to pawn their gold instead of selling it.

“That manner of thinking is mostly common with the middle class. But the lower middle class tends to circulate gold more. They tend to buy and sell gold as per need, redeem and buy,” said Arole. This class must be targeted more for such schemes.

Moreover, India’s gold buying has gone through a surprising shift. Bar and coin demand has been going up – and for a few quarters even matched that of jewellery purchases, as seen in the table below.

“Investment products also gained a larger share of sales within retail jewellery stores. Anecdotally, for several retailers, the share of bars and coins rose from around 5-7% in 2024 to nearly 13-15% in 2025 due to strong consumer demand. Consequently, retail investment as a share of total demand rose to 33% in 2025 from 25% the year before,” says a Gold Focus report.

Consumers who are investing in these products – and growing in size – can be a good target market for the new gold monetisation scheme. Unlike legacy jewellery pieces, bars and coins have no sentimental value attached, and are bought only for investment. Most Indians buy them in the form of bar or coins that are 24 carats. These can be exchangedfor 22-carat jewellery at any given point in time.

Due to high prices, gold recycling too has increased. “Old gold exchange has become a key driver for growth and sales and is 50% of business now,” said Sen.

The Rules Of Redemption

As envisaged by experts, gold collected by retail consumers will be converted to electronic gold receipts (EGRs) and stored.

Yet questions remain about where and how easily the deposited gold can be redeemed. Indians trust informal systems, but bureaucracy and government systems can lag and could lessen participation in the scheme.

To mobilise large holdings, the gold monetisation policy must ensure that gold holdings are as liquid as physical gold. The IBJA report suggests full physical redemption rights, with EGRs back to gold at any time.

“Once I deposit gold attached to a certain bank account, I should be able to redeem it anytime, anywhere. Retail consumers won’t care too much for capital gains. They expect it to be transferred at no extraordinary tax or cost to them. If the scheme reaches critical mass, we should have systems that can send it abroad as well, for which we can use GIFT City as a model,” said Vaidya.

Some believe that there is a case for interest payout in the form of gold instead of INR, which could entice more deposits. But most of the apprehensions they have are over the lock-in time period as well. “If one is targeting the lower strata of consumers, the lock-in period cannot be too long,” said Arole, reminding that the conversion factor is high amongst them.

Can There Be A Gold Regulator?

Whether implemented through jewellers, banks or NBFCs, the new policy must be governed by a quasi-government authority according to the IBJA.

The body could be modelled around the National Payments Corporation of India, with the involvement of fintechs that can offer seamless options to consumers and can spread and market the scheme appropriately. The regulatory body must select authorised jewellers with strict parameters and enforce criteria for refiners to reduce flight/default risks.

IBJA added that fragmented oversight in the earlier version of the policy was a roadblock.

Regulatory responsibility was split across the Reserve Bank of India (RBI), the Ministry of Finance (MoF), the Ministry of Commerce (MoC), the Directorate General of Foreign Trade (DGFT) and Customs. Refiners had to navigate multiple conflicting frameworks with no single accountable body.

Economists, banks and other participants should also come together for risk assessment and hedging to provide meaningful returns in the form of interest for consumers.

“The RBI, ministries, banks and jewellery industry associations and jewellery companies have to come together to formulate the rate of interest and what returns consumers and investors will get against their gold that they deposit,” said Sen.

All in all, gold is a much-loved asset, which is extremely liquid and offers a sense of security to Indians, especially women. A scheme that could extract this extensive latent wealth must offer a sense of comfort that can match what a chain or a bangle can offer.