Industry estimates suggest Indian households and institutions hold nearly 25,000 tonnes of gold, much of it lying unused in lockers and homes. At current prices, even partial mobilisation could unlock liquidity worth around $90 billion or more.
What Is the Gold Monetisation Scheme?
The Gold Monetisation Scheme was launched by the Government of India to encourage people to deposit idle gold with banks in exchange for:
- Interest income
- Safety
- Tax benefits in some cases
Banks can then use that gold for:
- Lending
- Refining
- Jewellery supply
- Reducing dependence on imported gold
Why the Industry Wants Changes
Industry bodies believe the current scheme has seen limited success because of:
- Complex procedures
- Emotional attachment to gold
- Purity testing concerns
- Limited awareness
- Low returns for depositors
Jewellers argue that simply discouraging gold buying is unlikely to work in India because gold demand is deeply connected to:
- Weddings
- Festivals
- Cultural savings habits
- Rural wealth storage
Instead, they want reforms that make monetisation easier and more attractive.
Suggested Reforms
Possible recommendations include:
- Simplified gold deposit process
- Better interest rates
- Wider participation by jewellers
- Faster purity verification
- Digital gold integration
- Easier redemption options
Why This Matters for India
India is one of the world’s largest gold importers. High gold imports:
- Increase pressure on the current account deficit
- Weaken the rupee
- Raise dependence on foreign exchange outflows
If domestic idle gold is brought into the formal economy:
- Imports could reduce
- Liquidity in the financial system could improve
- Banks and jewellers may get easier access to gold supply
- Economic pressure from large gold imports may ease
Market Perspective
The discussion comes at a time when:
- Gold prices are near record highs
- The rupee is under pressure
- Oil prices are elevated
- Global uncertainty is increasing safe-haven demand for gold
So policymakers are trying to balance:
- Economic stability
- Import management
- Consumer sentiment
- Cultural demand for gold
Overall, the jewellery industry’s position is that monetising existing gold stockpiles may be a more practical long-term solution than trying to suppress gold consumption itself.
