Gold Deposit Investment Returns Government Scheme

To mobilise gold lying idle with people, the government is in talks with jewellers to introduce a monetisation scheme where subscribers will be offered interest income on the value of gold deposited.

According to sources in the jewellery industry, the government has been in talks with big players wherein jewellers will assume a key role to mobilise gold. Discussions have been constructive, and a scheme could be announced soon, a top industry source told The Indian Express.

The talks come at a time when the exchange rate is under pressure due to many factors: elevated fuel prices following the West Asia crisis, investor concerns about the domestic stock market, and elevated gold imports.

When contacted, Rajesh Rokde, Chairman, All India Gems and Jewellery Domestic Council, the body representing the jewellery industry said, “The government has communicated that they are serious regarding the proposal and have assured to implement it as swiftly as it can be”. He, however, refused to share details of the proposal “because the government is currently working on it.”

Queries sent to the Reserve Bank of India and the Ministry of Finance regarding the proposal being discussed remained unanswered at the time of publishing.

Depositors can head to their nearest jeweller and deposit physical gold. Market players said the scheme will be implemented via demat accounts, just like stocks.

The gold deposit will be reflected in the demat account. In return, the depositor will earn some interest, theoretically making it a win-win proposal for both parties.

While there is no official estimate of gold held by Indian households, experts put the figure significantly upwards of 20,000 tonnes.

This locked-up gold, when monetised, can make India a trade account surplus nation, according to Nilesh Shah, Kotak Mahindra AMC’s Managing Director.

“Assume if just 10% of the gold held is monetised. That would be around $400 billion roughly when rounded off. Our gross FDI is about $80 billion, so this gold would be equivalent to 5 years of FDI flows,” said Shah, who’s also a part-time member on the Economic Advisory Council to the Prime Minister (EAC-PM). This would also have a broader impact on the economy, increasing domestic consumption and forcing companies to invest more.

“Investments depend on either domestic or global savings. We have depended on global savings to an extent. Now imagine if our domestic frozen savings are added to the available liquid savings, and foreign capital continues to flow, then suddenly there is so much capital available for investment,” Shah added.

The involvement of jewellers as the contact point instead of banks is the key difference between the current proposal and the previous scheme launched in 2015 that had mobilised just 38 tonnes of gold by March 2025, as per government data.

“Families are more often comfortable in dealing with their family jewellers in cases regarding gold and silver. That comfort is missing when banks play that role,” explained Rokde. According to Prithviraj Kothari, President of the India Bullion and Jewellers Association (IBJA), the “big shift” is moving beyond banks. “Under the earlier scheme, you had to walk into a bank or a designated testing centre — that discouraged a lot of people. If executed well, this (new scheme) could be a genuine gamechanger — it removes friction, taps into trust networks Indians already have with their family jeweller, and could meaningfully improve mobilisation.”

Another difference is that in addition to jewellery, gold coins and bars may be eligible to be deposited under the scheme being discussed, people in the know said. This is aimed at widening the net for gold deposits.

The industry has also suggested an incentive framework for jewellers to make them more enthusiastic and aggressive in pushing the scheme, Rokde said. While Rokde declined to provide exact figures, reports suggest any incentive could be 0.75-1% received by jewellers from refiners. This makes it attractive for jewellers, while refiners benefit from higher volumes.

The government is learnt to have been mulling over a gold monetisation scheme for some time. “Initially, we had expected the scheme to come through by August 15. However, we are confident it will come by this month or latest by the time the festival season starts (in October),” an industry expert said.

Kothari of IBJA added that the exact framework for bringing jewellers on board as collection partners and other details – such as assaying standards, the liability if purity disputes arise, and how tax documentation will be handled for depositors – are being worked out.

Some sections of the bullion market are also speculating the government may have flagged some issues with the proposal, which may be delaying the scheme’s announcement. For example, the inclusion of gold coins and bars in the scheme could lead to consumers buying more of these in order to then deposit them and earn interest. This would undermine the scheme, whose objective is to curb imports.

“In the case of jewellery, people are reluctant to part with them due to sentimental value and maybe potential change in form factor. These worries are not there for investment (bars and coins). If you allow these, then indirectly you may be incentivising investing (in gold) for people. I can buy and then give it to the government, earning a yield,” said a bullion analyst at a domestic trading firm.