The Indian government is planning to revamp the Gold Monetisation Scheme by partnering with local jewellers. The move aims to bring vast household gold into the formal economy, potentially reducing India's massive gold import bill and lowering financing costs for the jewellery sector.
The Indian government is reportedly planning a significant overhaul of the Gold Monetisation Scheme (GMS) to unlock an estimated $5 trillion in dormant household gold. By shifting the operational focus to local jewellers, the government aims to leverage their established trust with customers to convert idle family assets into active economic resources.
The proposed framework is expected to offer participating jewellers an incentive between 0.75% and 1% of the value of the gold they collect. This commission, which would be paid by refiners, is intended to motivate jewellery retailers to actively collect gold from households and deposit it into the formal financial system. Industry bodies, including the India Bullion and Jewellers Association, have supported this approach as a necessary step to overcome the limitations of earlier versions of the scheme.
For the Indian jewellery industry, this initiative serves two primary strategic purposes. First, it targets the reduction of the nation’s reliance on gold imports. In FY26, India’s gold imports reached a record $71.98 billion, a significant burden on the balance of payments. By using domestic gold as raw material, the industry could reduce its dependence on expensive imports. Second, the move could lower operational costs for jewellers. Access to domestically sourced gold is expected to reduce the interest rates on metal loans by 50 to 100 basis points, which would potentially improve profit margins and working capital efficiency for retailers.
Despite the strategic intent, the scheme faces significant hurdles, as seen in the limited success of the original 2015 version, which mobilised only about 39 tonnes of gold by late 2025. The primary challenge remains the lack of public trust. Many Indian households are hesitant to deposit inherited or family gold into banks, fearing tax scrutiny or potential issues with ownership transparency. Additionally, there are operational risks, such as the logistics of purity testing, melting, and the need for a robust digital chain to ensure accountability from collection to refining.
Investors may monitor the final policy details and implementation timelines, as the effectiveness of the model will depend on consumer willingness to participate and the transparency of the logistics involved. The success of this policy could also influence the gold loan book and inventory management strategies of major listed players in the sector, such as Titan Company, Kalyan Jewellers, and Senco Gold, by providing a more stable and cost-effective supply of gold.