South-India based retired financial professional Sharda (name changed), hasn’t been adorning her wedding jewellery and other gold coins gifted over years. Hence she decided to use the Government of India’s Gold Monetisation Scheme (GMS) to earn interest on the idle gold.

But staring March 2026, the 5-7 years and 12-15 years GMS scheme earning an interest of 2.25% and 2.5% have been discontinued. Her gold jewellery has now been melted and converted into tradeable bars along with 31.16 tonne worth of other gold held by State Bank of India in valuts, while Sharda holds certificate for her gold holdings and earns interest (see table) for the three years gold deposit.

This idle gold held in GMS is hardly a fraction of the estimated 25,000 tonnes held by Indian households in physical gold held in their own lockers and home safes.

So far, one had to visit the State Bank of India’s bullion branch or the collection centres to test the gold’s purity, certify and convert the metal into certificate format of 995 purity gold, which is measured in upto three decimals.

While several changes have been made including reducing the minimum gold tended to 10 grams from 30 grams earlier, the scheme has failed to take off at the intended pace.

To unlock this idle gold to productive economic use and enhance adoption, a gold trade-body All India Gems and Jewellery Domestic Council (AIGJDC) has proposed to the Reserve Bank of India and Ministry of Finance to allow a jeweller-integrated revamped GMS scheme.

How much your metal under gold monetisation scheme earns?

Year Interest (%)
1 0.5
2 0.55
3 0.6
Source: RBI

# Schemes with 5-7 years (2.25%) and 12-17 years (2.5%) discontinued starting March 26, 2026

Converting traditional gold jewellery from non-yielding asset into a productive financial instrument is possible through GMS. However, gold jewellery held by individuals – where 18-35% of the amount has been spent on making charges – are melted under the GMS scheme wasting significant amount of money involved by the Indian households. Hence, individuals prefer to borrow against gold jewellery, instead of opting for monetisation scheme.

While hallmarking of jewellery pan-india across more than 280 districts has built assurance on the purity of jewellery, converting the same into tradeable gold bars requires expertise and precision in measuring purity. Availability of this infrastructure is critical.

“An effective and sound GMS has long been a missing lever in India's gold sector reform agenda. The strength of any revamped GMS will ultimately rest on the integrity of the refining backbone. Certified refiners play a central role from assaying to the actual conversion of mobilised gold into standardised bars,” says Samit Guha, Managing Director & CEO, MMTC-PAMP.

This refiner accreditation standard must be non-negotiable, say industry experts. “The scheme cannot afford to onboard players who do not meet internationally recognised benchmarks for purity and process. Significant investment in assaying and processing infrastructure across banking and collection touchpoints remains a prerequisite,” says Guha.

But why is there a need to dematerialised gold, held physically by Indians.

“Dematerialisation – where physical gold is converted into standardised digital gold balances held in regulated bank accounts such as e-Gold Savings Accounts (e-GSA) reduces opacity, improves compliance and eliminates repeated handling, testing and logistics associated with physical gold movement. This enables gold to function as an interest-bearing financial asset rather than a passive store of value,” says Rokde.

But the next leg of reforms in gold handling can be established only once the credible infrastructure and front-line handling of the gold jewellery can be laid and scaled.

What the future holds?
The thought process for dematerialisation of gold, advances the structural fabric of India’s gold economy from fragmented, idle and informal gold holdings to a digitally integrated, transparent and productive financial asset.

Even though collectively India golds world’s largest gold reserve among individual households, it remains dependent on imports heavily for the consumption. For instance, at a time when the country is trying to preserve foreign exchange reserves and dedicate larger sums to LPG, petrol and other critical goods for survival of the economy, 20 tonne worth of gold was purchased by Indians on a single day of Akshaya Tritiya in 2026, when the prices hovered at ₹1,54,000 per 10 grams. Three such major auspicious buying occasions result in draining the exchequer.

“Dematerialisation is a necessary precondition for future innovations. While the immediate objective is to establish a secure and regulated ecosystem, the architecture is inherently scalable. Over time, it can support, secondary market liquidity for gold balances, seamless conversion into jewellery purchases through jeweller integration and integration with broader gold-linked financial products,” says Rokde.

At the consumer level, GMS transforms gold, which currently requires storage-cost, insurance and care, into an interest-earning asset, without exiting the gold ownership and participating in the appreciating cost of the metal that yielded 64% returns during the calendar year of 2025.

Courtesy : Livemint