Nevertheless, the scenario might quickly change. The federal government is reportedly planning to revamp its flagship Gold Monetisation Scheme (GMS) to show this huge hoard of idle metallic into an lively financial asset. It might not be simple, given Indian households’ fixation with gold, however the authorities this time, as per the proposal, is delegating the duty for this scheme to jewellers, one group that folks belief with their treasure.
This would be the first time that the participation of jewellers is being sought to spice up the attraction of the scheme, which is anticipated to be rolled out later this month. “We’re awaiting only one or two closing approvals, and many of the approvals have been sought,” Rajesh Rokde, Chairman, Gems & Jewelry Council, informed ET On-line.
ALSO READ | Indian jewellers may earn up to 1% incentive under revamped Gold Monetisation Scheme, says IBJA
He mentioned the scheme would assist mobilise idle family jewelry into the formal monetary system. “Utilising this mobilised gold as uncooked materials for the jewelry trade will immediately scale back India’s gold imports.”
ET On-lineThe quantity of India’s personal gold holdings is staggering. Estimates differ relying on methodology, however all level to the identical conclusion that Indian households collectively maintain one of many world’s largest reserves of personal wealth in gold. In accordance with the estimate by the World Gold Council, Indian households and temples at the moment maintain round 25,000 tonnes of gold. Different trade estimates place the determine nearer to 30,000 tonnes, whereas some research point out that Indian family and temple holdings may attain as much as 50,000 tonnes.
ALSO READ | Jewellers may be looped in for idle gold mobilisationGiven the huge quantity of untapped gold, jewellers are anticipated to play a vital function within the success of this scheme
A 1% perk for jewellers
The revamped GMS scheme, nonetheless awaiting closing approval, is prone to earn Indian jewellers an additional 1% revenue on every bit of previous gold they acquire. Underneath the proposal, submitted to the federal government by the India Bullion and Jewellers Affiliation (IBJA), jewellers will hand over buyer gold to refiners and obtain roughly a 1% direct incentive from the refiners.
In an unique interview with ET On-line final week, IBJA President Prithviraj Kothari mentioned that jewellers are prone to earn a fee of practically 1% on the worth of the gold they deal with. “In our proposal, we now have really useful a 0.75% to 1% incentive, although the ultimate determine shall be determined by the federal government.”
“In our proposal, we now have really useful a 0.75% to 1% incentive, although the ultimate determine shall be determined by the federal government.”
Trade specialists view this margin as a possible “sport changer”. In retail, an incentive of 0.75% to 1% may be vital, particularly for high-volume gamers. Sunil Katke, Head of Commodities Retail Enterprise at Kotak Securities, mentioned that passing on a 100-basis-point profit on turnover on to jewellers may very well be a robust cause for them to actively promote the scheme.
Then there’s an excellent greater motivation: cheaper financing prices. Katke mentioned this may very well be the most important profit for jewellers. “The largest benefit… is the decrease financing price. In case you take a gold metallic mortgage on imported gold, rates of interest are round 5%. If we make gold out there domestically, these charges may drop by 50 to 100 foundation factors,” he defined.
Sourcing gold regionally, as a substitute of importing, makes borrowing considerably cheaper for jewellers, immediately trimming their operational bills. “Three main factors that might profit the jewellers: one, your gold metallic mortgage financing price can go down; two, you’ll be able to maintain a smaller stock, blocking fewer funds to enhance working capital; and third, you’ll be able to cross-sell a whole lot of merchandise as extra leads come to you,” he mentioned.
Echoing an analogous opinion, Mangesh Chauhan, Managing Director, Sky Gold & Diamonds, mentioned the key profit for jewellers would come from substantial financial savings in curiosity prices. In a dialog with ET On-line, he mentioned working capital loans at the moment price anyplace between 8.5% and 10.5%, whereas gold underneath metallic mortgage constructions prices round 2% to 4%. This interprets to roughly a 6% each year saving on curiosity prices for a jeweller.
“Furthermore, as a result of the gold itself acts as stock, jewellers save round 4% to 4.5% in hedging prices since they don’t have to hedge their gold place individually,” he mentioned.
In less complicated phrases, ditching normal money loans for gold-denominated borrowing is prone to considerably decrease a jeweller’s stock funding prices.
Decrease import invoice
India, the second-largest shopper of gold after China, roughly imports near 700 to 900 tonnes of gold yearly. In accordance with authorities knowledge, gold imports in FY26 surged 24% to a document $71.9 billion, whilst import volumes fell to 721 tonnes. Though the rise was largely pushed by hovering gold prices, the next import invoice might put strain on the financial system. With the continued geopolitical tensions pushing up commodity costs and weighing on the rupee, policymakers are more and more involved concerning the affect of a better gold import invoice on the nation’s steadiness of funds. Towards this backdrop, Katke mentioned that entry to monetised home gold may probably scale back dependence on imported gold.
That alignment between state coverage and company incentive has retail giants desperate to execute. Suvankar Sen, Managing Director and CEO of Senco Gold & Diamonds, expressed sturdy confidence that the up to date framework will lastly unlock India’s dormant gold reserves.
“It’ll work for the nation, for positive,” Sen informed ET On-line, noting that the scheme offers jewellers a compelling new service to supply walk-in shoppers. “It helps us mobilise gold, get gold from the shopper, and use that gold. Footfalls will enhance, our reference to clients will go up, and the potential for the scheme being profitable will go up,” he mentioned.
Why have been jewellers roped in?
The GMS was launched in 2015 with a easy goal to encourage households to deposit idle gold with the banking system and earn returns on it. The deposited gold may then be refined, recycled, and put again into productive use. In observe, the scheme by no means gained vital traction. By November 2024, solely about 31 tonnes of gold had been mobilised underneath the programme by way of roughly 5,700 depositors. In contrast with the overall gold held by households, the achievement was negligible.
The primary cause was a scarcity of belief, as Indian households have been reluctant to half with their inherited gold and jewelry and provides it to banks. With jewellers, nevertheless, that belief already exists, as most Indians naturally purchase their gold from their native jewellers.
“Each buyer buys gold by way of jewellers. If the fee is handed on to jewellers, they are going to promote the scheme; in a manner, jewellers turn into model ambassadors. They are going to now attain each dwelling, passing it down from massive jewellers to smaller ones and distributors,” mentioned IBJA President Kothari.
For unbiased jewellers, who’ve lengthy wrestled with excessive gold sourcing prices and tight working capital constraints, the brand new structural change may very well be a lifeline. “Small jewellers primarily face two huge hurdles: hovering gold prices and intense working capital strain,” as per Nitin Gupta, founding father of Delhi-based Swastik Jewels. “If GMS grants us entry to lower-cost gold alongside a workable margin, it can assist us compete with the large chains. For us, that is in the end about liquidity and leveraging our conventional belief with clients.”
This may very well be a “game-changer” for small- and mid-sized jewellers if executed proper, he mentioned, including that it’ll assist jewellers with cheaper metallic and let clients earn on idle gold.
“The trade wants it, particularly now, with 15% responsibility and excessive costs.”
What held again GMS prior to now
Trade executives that The Financial Occasions spoke to have argued that earlier schemes struggled as a result of jewellers have been largely excluded from the method and Indians simply couldn’t belief banks with melting their gold.
Lenders couldn’t make this scheme work as a result of they lacked the manpower, as per Kothari. Nobody even knew which financial institution branches accepted gold deposits, he mentioned, including that within the new proposal, financial institution involvement is minimal—deposits stick with banks, however their operational function is nil.
Along with this, the returns supplied have been modest, and the method was usually seen as cumbersome. The federal government ultimately discontinued components of the scheme in 2025 amid altering market situations.
Senco MD mentioned the urgency can also be completely different this time, with strain on the exterior sector making gold imports an even bigger concern. “In 2023, the disaster wasn’t there. India was in a way more comfy scenario. Now there’s a disaster, so we have to do it now.”
Three years in the past, the federal government final tried to revive the GMS framework—a time when reasonable import prices meant neither retailers nor shoppers felt an pressing have to act.
Sen mentioned the latest surge in previous gold exchange suggests that customers at the moment are open to parting with their gold when jewellers are concerned within the course of. “Due to the disaster, all of the jewellers promoted previous gold alternate within the final two months, and 40-50% of our enterprise occurred by way of that. So, enterprise continued to occur, and the nation additionally obtained protected by decreasing the imports.”
He expects larger coordination between banks and jewellers underneath the proposed framework to enhance its probabilities of success.
But seamless coordination is just half the battle, as operational belief stays a serious hurdle. In accordance with Katke, the scheme’s final success hinges on ironclad transparency surrounding purity checks and logistics. “The largest problem that I really feel is belief… Transparency is one thing which would be the key. The melting course of and purity evaluation course of have to have transparency.”
“Whether or not the deposited gold has a digital monitoring mechanism, a secured logistics chain, and seamless coordination between jewellers, banks, refiners, and assaying centres, these operational particulars would require immense focus,” Katke mentioned.
