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By: Ramkumar Subramanian
24 Aug 2026 4 min read
Monetisation of idle household gold remains relevant though the maiden version of the scheme did not find many takers. Any revival should be judged against the same core tests: depositor trust, operational simplicity, transparent valuation, and productive end-use, writes Ramkumar Subramanian
Gold Monetisation is the attempt to convert privately and institutionally held gold into a formal financial asset. The macroeconomic challenge in India is that a large domestic gold stock coexists with repeated import demand. World Gold Council (WGC) research estimates household gold stock at 23,000- 25,000 tonne. If even a small usable portion enters the formal system, it can support bullion supply, improve financialisation and soften import dependence over time. Under the Gold Monetisation Scheme of 2015, eligible depositors place gold with designated banks, after which the gold is assayed, refined and credited in a gold deposit account. The policy objective is not merely to give a return on idle gold. It is to mobilise household and institutional gold, use it for productive purposes and reduce long-term reliance on gold imports.
The RBI framework permits deposits of raw gold such as bars, coins and jewellery, excluding stones and other metals. The minimum deposit is 10 grams. Deposits are routed through Collection and Purity Testing Centres, recognised mobilisation agents, refiners or designated bank branches. The gold is converted to standard 995 fineness. Interest accrues from the date of conversion into tradable gold bars or 30 days after receipt, whichever is earlier. The Scheme’s medium-term and long-term government deposits were discontinued on March 26, 2025.
It succeeded in creating a regulated mechanism, but not really in changing household behaviour at scale. The RBI framework creates the plumbing: KYC, assaying, valuation, deposit accounts, reporting, redemption and risk management. WGC research, however, characterised the amount mobilised as modest relative to India’s gold stock. This distinct-ion is important. It is institutionally well-designed in parts, but behavioural adoption has remained the harder test.
The core obstacle is trust. Many depositors compare gold deposit returns with rupee fixed deposits, although the economic exposure is different. Jewellery also carries emotional value, especially inherited pieces, and melting jewellery is a psychological barrier. Awareness has also been limited. World Gold Council research cites an India Gold Policy Centre household survey indicating that only 6% of households were aware of the scheme. A policy cannot scale if the customer does not understand it, trust it or find it convenient.
First, monetisation can put idle gold to productive use. Second, it can deepen India’s bullion and financial markets by creating a formal chain involving banks, testing centres, refiners and jewellers. Third, it can support import substitution over the long term. Fourth, it can improve transparency in a market where physical gold often remains outside formal reporting channels. Finally, it can complement gold loans, gold-backed products and electronic gold receipts as part of a broader financialisation agenda.
The process is operationally complex. It requires purity testing, refining, valuation, custody, documentation, redemption discipline and grievance handling. Depositors may lose the specific jewellery since it is melted. Banks must manage gold price, liquidity and operational risks. If incentives are weak, banks may treat the scheme as an administrative obligation rather than a customer proposition. Poor execution could damage trust in formal gold products more broadly.
A second version should start with what people are willing to monetise. Bars, coins, temple gold and institution-al holdings may be easier first targets. The customer journey should be simple, with transparent valuation, clear time-lines, digital tracking, standardised receipts and predictable redemption choices. Banks and jewellers should have clear responsibilities and service standards. The proposition should not be sold as a high-return investment but positioned as safe, regulated conversion of idle gold into productive capital.
Yes, but with modest promises and strong execution. The idea remains economically sound. The failure was not in the objective. The weakness was in translating policy intent into customer confidence. Gold Monetisation 2.0 should therefore be treated as a trust programme first and a deposit programme second. If India can monetise trust, it can monetise gold.
This article first appeared in the Financial Express on 24 August 2026.
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