Government likely to announce new gold monetization scheme: sources — TradingView News

The central government is expected to announce a new gold monetization program, according to sources familiar with the matter. The official announcement is expected within the next two weeks.

Sources expect the move to mobilize more than 1,000 tonnes of gold.

Under the proposed framework, jewelers across the country could be included as “collection partners” in the revamped system, allowing them to pool household gold deposits. Previously, only banks were allowed.

“Under the proposed framework, jewelers across the country could be included as collection partners in the revamped gold monetization scheme, allowing them to pool household gold deposits,” the Indian Jewelers and Goldsmiths Federation (AIJGF) said.

Indian gold and jewelry bodies have urged the government to revamp the program, as they seek structural solutions to reduce gold flows, without affecting domestic demand or livelihoods linked to the sector. Even if 5% of Indian household gold were monetized, it could generate liquidity of up to $90 billion, analysts say.

The move comes after Prime Minister Narendra Modi appealed to citizens to postpone their gold purchases for a year.

Money control contacted the Ministry of Commerce for further clarification. The story will be updated once they respond.

India is one of the world’s largest buyers of gold, the yellow metal acts as a store of value, while also being used for ornamental purposes. However, industry bodies have suggested that this has led to “ideal gold”. Therefore, immense value can be unlocked through a redefined and regulated system.

Introduced in 2015, the GMS was introduced to reduce the current account deficit by limiting gold imports. He encouraged investors to buy gold rather than buying physical gold. Investors could deposit their gold in bank lockers and earn interest (between 2.25% and 2.5%) on their gold depending on the length of their deposit.

At the time of withdrawal, for short term deposits, withdrawals in the form of physical gold or rupee equivalent value were permitted.

As of March 2025, after a decade, only 38 tonnes had been monetized, which is slightly less than India’s estimated gold reserves of 25,000 tonnes. In addition, at the same time, the government abolished medium and long-term deposits.

The failure of the project was the result of increasing interest losses borne by the Treasury. “Ultimately, the government made a loss with the scheme. It had to pay the appreciation fee, along with 2% annual interest, to entice investors,” said Bhavik Patel of Tradebulls Securities. The program was not covered, leading the state to bear the costs of the assessment at the time of withdrawal.

Moreover, according to an industry body, GMS also failed for structural reasons. Indian families do not want to melt down emotional and inherited jewelry for a small return, as old ornaments carry family memory, religious value and social importance.

There are also fears of tax audits and documentation questions on household gold. “Banks have little incentive to promote this system aggressively because gold deposits do not bring sufficient business profits or balance sheet benefits,” the AIJGF added.

Choice Broking’s Aamir Makda suggested that if such a project managed to mobilize even five percent of India’s private gold reserves, which would amount to about 1,250 tonnes, it would be equivalent to $80 billion to $90 billion in internal liquidity.

Theoretically, this could bring India’s gold imports to zero for almost two years, significantly reducing demand for US dollars and possibly leading to significant appreciation of the rupee.

Experts also said a revamped GMS could lead to a reduction in dependence on imports, while strengthening the formal gold economy. This could also convert unused gold into “productive national capital”.