With gold imports hitting a record $71.98 billion in FY26 and PM Modi personally urging citizens to stop buying gold, the pressure to unlock India’s estimated 20,000+ tonnes of household gold has never been greater. A sweeping overhaul of the Gold Monetisation Scheme is now being actively shaped — here is exactly what is changing, what is already live, and what it means for you.
The Context: Why This Matters Right Now
The timing of the Gold Monetisation Scheme (GMS) revamp is not coincidental. In FY2025-26, India’s gold imports surged 24% to an all-time record of $71.98 billion — making gold the country’s second-largest imported commodity by value, after crude oil. Even though the volume of imports dipped slightly to 721 tonnes (from 757 tonnes the previous year), the rupee cost ballooned because global gold prices rose from $76,617/kg to $99,825/kg during the same period.
The stakes are macroeconomic. Gold imports are a direct drain on India’s foreign exchange reserves and a key driver of the current account deficit (CAD), which widened to $13.2 billion (1.3% of GDP) in Q3 FY26.
On May 11, 2026, Prime Minister Narendra Modi made an unusually direct public appeal: he asked Indian citizens to avoid purchasing gold for at least one year, framing it as an act of economic patriotism amid the ongoing West Asia crisis and its cascading impact on global supply chains. The appeal rattled jewellery stocks and made global headlines, but it also put the spotlight squarely on a deeper policy question — instead of simply buying less gold, why not put the gold India already has to work?
That is precisely what the revamped GMS is designed to do.
What Is the Gold Monetisation Scheme
The Gold Monetisation Scheme was first launched by PM Modi on November 5, 2015, replacing the older Gold Deposit Scheme of 1999. Its core idea is simple: instead of leaving gold sitting idle in home lockers or bank safe-deposit boxes earning nothing, citizens deposit physical gold with designated banks, get a certificate, and earn interest on it — just like a fixed deposit, but denominated in grams of gold.
The deposited gold is then lent to jewellers and manufacturers via Gold Metal Loan accounts, reducing their need to import fresh gold from abroad. In theory, it is an elegant circular economy for gold.
In practice, it has largely failed to gain traction. By March 2025, only around 38 tonnes had been mobilised in nearly a decade — a fraction of the tens of thousands of tonnes the scheme was designed to unlock.
What the Scheme Currently Offers (As of May 2026)
Following a significant restructuring in March 2025, the GMS now operates only through Short-Term Bank Deposits (STBD). Here are the key current parameters:
- Minimum deposit: 10 grams of raw gold (jewellery, coins, or bars — stones and other metals excluded)
- Maximum deposit: No upper limit
- Tenure: 1 to 3 years (short-term only)
- Interest rates: 0.50% p.a. (1 year), 0.55% p.a. (up to 2 years), 0.60% p.a. (up to 3 years)
- Interest payment: In Indian rupees, calculated based on gold value at time of deposit
- Redemption: Choice of gold (standard 995-fineness bars/coins) or INR equivalent at maturity
- Tax treatment: Interest and capital gains are fully exempt from income tax, wealth tax, and capital gains tax under Section 10(15) of the Income Tax Act
- Participating banks: SBI, HDFC Bank, ICICI Bank, PNB, Indian Overseas Bank, Bank of Baroda, and others
One important practical caveat: your jewellery will be melted.
Gold is sent to Bureau of Indian Standards (BIS)-certified Collection and Purity Testing Centres (CPTCs), refined into bullion bars, and you will never get your original pieces back. At maturity, you receive equivalent weight in 995-fineness gold or cash. Any embedded stones are removed and returned to you before testing.
The Medium-Term (5–7 years) and Long-Term (12–15 years) Government Deposit components — which offered 2.25% and 2.50% interest respectively — were officially discontinued by the RBI from March 26, 2025, due to low participation and cost concerns for the government.
The Revamp: What Is Being Proposed
Active discussions are now underway between the RBI, the Finance Ministry, and key industry bodies including the All India Gems and Jewellery Domestic Council (GJC). The GJC has submitted a detailed jeweller-integrated framework developed through structured consultations across the banking, refining, and jewellery sectors. Here is what the revamped scheme is expected to introduce:
1. Dematerialised Gold Balances — The single biggest structural change being proposed. Instead of requiring physical melting upfront, deposited gold would be converted into a digital (demat) gold balance held within the banking system — similar to how equity shares are held in a demat account. This directly addresses the most common objection to the current scheme: the irreversible melting of heirloom jewellery.
2. Jeweller-Integrated Framework — GJC has proposed making jewellers formal participants in the deposit chain. This would allow households to deposit gold through trusted local jewellers rather than having to navigate the bank-CPTC process independently. The reach and trust of India’s 6+ lakh jewellers would serve as a distribution network for the scheme.
3. Better Returns — The current 0.5%–0.6% interest rate is widely acknowledged as a significant deterrent. The revamp is expected to include a review of the interest rate structure to make deposits more competitive, potentially including market-linked mechanisms.
4. End-to-End Digital Tracking — A fully digital system covering the entire chain — deposit, assay, dematerialisation, and credit — with complete audit trails and KYC compliance at every stage. This addresses both transparency concerns and income tax scrutiny anxieties for depositors.
5. Expanded Gold Formats — The revamped scheme will explicitly cover bullion, coins, and jewellery. In 2025 alone, approximately 280 tonnes of gold was purchased in India in investment formats (coins and bars) — a segment that is far easier to deposit since it carries less emotional value than inherited jewellery.
GJC Chairman Rajesh Rokde stated that the proposed model “integrates jewellers into a regulated, digital ecosystem, significantly enhancing transparency, trust, and accessibility for consumers.” Vice Chairman Avinash Gupta described the framework as “practical, scalable, and fully aligned with regulatory expectations.”
Why the Old Scheme Failed — And Why the Revamp May Fare Differently
Understanding the failure of GMS 1.0 is essential to evaluating whether GMS 2.0 can succeed. The barriers were structural, not superficial:
- Melting aversion: Indian households, particularly in tier-2 and tier-3 cities, hold gold that is deeply tied to family memory, weddings, and religious significance. The prospect of irreversible melting was a dealbreaker for the vast majority.
- Modest returns: 2.25%–2.5% interest looked unattractive against gold’s own price appreciation of 15–20% annually in recent years.
- Tax scrutiny fears: A large portion of household gold — especially inherited gold — has no formal purchase documentation. Depositing it risked triggering income tax questions that households were not willing to invite.
- Operational complexity: The CPTC process, documentation requirements, and limited bank branches made the process friction-heavy.
- Awareness gap: The scheme suffered from poor visibility outside urban centres.
The dematerialised gold balance proposal directly addresses the melting aversion. The jeweller integration addresses distribution and awareness. Better returns and digital tracking address the economics and transparency concerns. The tax scrutiny issue remains unresolved and will likely need a dedicated policy intervention — possibly an amnesty or simplified declaration window — to fully unlock inherited gold.
Former Finance Secretary Subhash Chandra Garg, who was involved in the original scheme’s design, has publicly acknowledged that earlier gold schemes were expensive for the government and need better structural design. Former UCO Bank MD R K Takkar noted that while banks enjoy strong public trust, operational hurdles around purity testing still need to be resolved.
The Macro Opportunity — And Why the Government Is Serious This Time
The numbers make a compelling case for why policymakers are returning to GMS with renewed urgency.
- India holds an estimated 20,000 to 35,000 tonnes of privately held gold — one of the largest concentrations of idle private wealth in the world, worth well over $1.5 trillion at current prices.
- India imports nearly 85% of its gold requirement. Every tonne of gold recycled domestically could save approximately $95 million (around Rs 893 crore) in import costs.
- Gold imports are now the second-largest component of India’s import bill — a structural drag on the rupee and the current account.
- Even a modest mobilisation of 500 tonnes annually — less than 1% of estimated household holdings — would meaningfully reduce import pressure.
The government has also raised gold import duty back to 15% (from 6% in Budget 2024-25) following PM Modi’s May 2026 austerity appeal, signalling a coordinated push to manage gold-related foreign exchange outflows from multiple policy angles simultaneously.
What Should You Do? A Practical Guide for Indian Households
Should you deposit your gold under the current or revamped scheme? Here is a structured way to think about it:
Consider depositing if:
- You hold investment-format gold (coins or bars purchased in the last few years with proper documentation)
- You have gold that you realistically will not use for 1–3 years
- You are comfortable with 995-fineness gold or cash at redemption (not the original pieces)
- Your gold has clear purchase records and the tax treatment is straightforward
- You want tax-free interest income with no capital gains tax liability at maturity
Wait for the revamp before depositing if:
- You hold heirloom or sentimental jewellery — the demat option being discussed would let you avoid melting
- You want better interest rates — the current 0.5%–0.6% may improve significantly under the revised structure
- Your gold is inherited without formal purchase receipts — seek tax advice before depositing
If you do choose to deposit now, approach your nearest SBI or other designated bank branch, carry KYC documents (Aadhaar, PAN, address proof), and ask for the Revamped Gold Deposit Scheme (R-GDS) form. Gold will be tested at a BIS-certified CPTC before a deposit certificate is issued.
Key Numbers at a Glance
- ₹6.77 lakh crore ($71.98 billion): India’s gold import bill in FY2025-26 — an all-time record
- 721 tonnes: Volume of gold imported in FY26 (down 4.76% from 757 tonnes in FY25)
- 20,000–35,000 tonnes: Estimated gold held by Indian households
- 38 tonnes: Total mobilised under GMS since its 2015 launch through March 2025
- 10 grams: Current minimum deposit threshold
- 0.50%–0.60% p.a.: Current interest rates on 1–3 year deposits
- 280 tonnes: Investment gold (coins and bars) purchased in India in 2025 — the easiest segment to monetise
- $95 million: Estimated import savings per tonne of domestically recycled gold
Bottom Line
The Gold Monetisation Scheme is not new — it has existed since 2015 and has largely underperformed. But the revamp being shaped right now is genuinely substantive, not cosmetic. The shift to dematerialised gold balances, jeweller integration, digital tracking, and potentially better returns addresses the core structural failures of the original.
More importantly, the macro environment has never been more favourable for GMS to succeed: record gold imports, a weakening rupee, an ongoing West Asia energy crisis, and a Prime Minister personally asking citizens to stop buying gold all point in the same direction. The government needs household gold to come out of lockers and into the financial system.
The revamped scheme is still in consultation and no official launch date has been announced. Watch for a formal RBI or Finance Ministry notification — that is when the new framework becomes actionable. Until then, the current Short-Term Bank Deposit option is live and fully operational for those with documented, investment-format gold.
FAQs
1. What is the minimum gold required to deposit under India’s Gold Monetisation Scheme?
Answer:
The minimum deposit is 10 grams of raw gold — in the form of jewellery, coins, or bars (excluding stones and other metals). There is no maximum limit.
2. What interest rate does the Gold Monetisation Scheme offer in 2026?
Answer:
As of 2026, the GMS Short-Term Bank Deposit offers 0.50% p.a. for 1-year deposits, 0.55% p.a. for up to 2 years, and 0.60% p.a. for up to 3 years. The medium and long-term deposit options (which offered up to 2.5%) were discontinued in March 2025.
3. Will my gold jewellery be melted if I deposit it under GMS?
Answer:
Yes, under the current scheme, jewellery is sent to BIS-certified purity testing centres and melted into standard bullion. You will not get the original pieces back. The proposed revamp aims to introduce a dematerialised gold balance option that would allow deposit without mandatory melting.
4. Is the interest earned on Gold Monetisation Scheme taxable?
Answer:
No. Interest earned on GMS deposits is fully exempt from income tax under Section 10(15) of the Income Tax Act. Capital gains at maturity are also exempt from capital gains tax and wealth tax.
5. What is the GJC’s proposed revamp of the Gold Monetisation Scheme?
Answer:
The All India Gems and Jewellery Domestic Council (GJC) has submitted a revised framework to the RBI and Finance Ministry that proposes: converting physical gold into dematerialised balances (avoiding mandatory melting), integrating jewellers as deposit agents, improving interest rates, and creating an end-to-end digital tracking system.
6. How much gold do Indian households hold?
Answer:
Indian households are estimated to hold between 20,000 and 35,000 tonnes of gold — one of the largest concentrations of privately held gold in the world, worth over $1.5 trillion at current prices.
