Yet, the country continues to import record amounts of the yellow metal—$71.9 billion worth in FY26 alone. This paradox lies at the heart of the government’s revamped Gold Monetisation Scheme (GMS 2.0). By bringing jewellers to the forefront as collection partners, the scheme aims to finally unlock this dormant wealth, offering significant financial benefits to retailers while addressing a critical macroeconomic vulnerability.
For jewellery retailers, the economics of GMS 2.0 are compelling. The India Bullion and Jewellers Association (IBJA) has proposed a 0.75% to 1% incentive for jewellers on the value of gold they collect and pass to refiners. For a major player like Senco Gold & Diamonds, which reported FY26 revenue of ₹8,430 crore, this creates a new revenue stream. If Senco mobilises even 10% of its revenue equivalent in gold deposits, the incentive could add ₹6-8 crore directly to the bottom line, expanding EBITDA margins by 65-87 basis points.
Beyond the direct commission, the scheme promises substantial savings on financing costs. Traditionally, jewellers rely on gold metal loans to finance inventory, often paying around 5% interest on imported gold. GMS 2.0 opens access to domestically sourced gold at interest rates of 2-4%. This 1-3% differential translates into significant working capital efficiency gains. For a jeweller with a gold loan of ₹100 crore, this means annual savings of ₹1-3 crore.
Furthermore, sourcing gold domestically eliminates the need for complex hedging strategies that typically cost 4-4.5% to protect against price volatility on imports. When combined with lower interest rates, the total cost reduction on gold acquisition could reach 18-23 percentage points. This dramatic cost structure improvement allows jewellers to either improve margins or offer more competitive pricing.
The push for GMS 2.0 comes against a backdrop of severe policy pressure.
This move, aimed at conserving foreign exchange amid a weakening rupee and geopolitical tensions, caused gold demand to plummet by 70% in the immediate aftermath. The effective tax burden on gold, including GST, rose to 18.45% from 9.18%.
This policy shock has created an urgent imperative for jewellers to find cheaper sourcing alternatives. With imported gold becoming prohibitively expensive, domestic mobilisation through GMS is no longer just an opportunity—it is becoming a competitive necessity. The high duty environment, coupled with elevated global prices, has squeezed margins and dampened consumer demand, forcing jewellers to look inward for supply solutions.
The previous iteration of the Gold Monetisation Scheme, launched in 2015, was a resounding failure. By November 2025, it had mobilised only about 39 tonnes of gold—a mere fraction of the household potential. The primary culprit was a profound trust deficit. Households feared that depositing gold into the formal banking system would invite tax scrutiny regarding the source of their wealth. Operational complexities also plagued the scheme; customers had to visit designated collection centres, complete extensive KYC formalities, and endure a melting process that destroyed the sentimental value of their jewellery.
The jeweller-led model directly addresses these barriers. Households interact with jewellers far more frequently than with banks for gold-related transactions. These relationships are built on decades of trust and cultural understanding. Senco Gold & Diamonds, for instance, has an 87-year legacy and is ranked as India’s second most trusted jewellery brand. Its existing old gold exchange programme already contributes about 44% of its revenue, demonstrating that customers are willing to monetise gold when dealing with a trusted partner.
By placing the front-end collection entirely in the hands of jewellers, the new proposal eliminates the operational bottlenecks that hampered banks. Banks lacked the specialised manpower and infrastructure to handle gold collections effectively. Under the new framework, jewellers handle customer interaction and initial assessment, refiners manage purity testing and processing, and banks focus on maintaining deposit accounts and regulatory compliance. This division of labour leverages the existing infrastructure of thousands of jeweller showrooms nationwide, vastly expanding the scheme’s reach compared to the limited network of bank branches.
The potential macroeconomic benefits are enormous. India’s gold import bill has surged, driven by high global prices and inelastic demand. This import dependence is a primary swing factor in the country’s current account deficit, which stood at $25.2 billion (0.6% of GDP) in FY26. Gold imports also put significant downward pressure on the rupee, which has depreciated over 22% against the dollar since FY22.
Successful mobilisation of household gold could dramatically alter this equation.
This could reduce the import bill by $35-72 billion annually, significantly alleviating pressure on the balance of payments and helping stabilise the rupee.
This creates a virtuous policy feedback loop. If GMS 2.0 successfully reduces import dependence, the government gains the fiscal space to lower the punitive 15% import duty over the medium term. Lower duties would reduce the incentive for smuggling, bring more transactions into the formal economy, and further boost the competitiveness of the jewellery sector.
GMS 2.0 also promises to reshape the competitive dynamics within the jewellery retail industry. Currently, large organised chains hold significant advantages over small and mid-sized players due to better access to bank finance and economies of scale. They can hold larger inventories and offer more competitive margins. Small jewellers often struggle with working capital constraints and limited access to formal credit.
By providing access to lower-cost domestic gold, GMS 2.0 acts as a competitive equaliser. Small and mid-sized jewellers can achieve cost parity with large chains on their primary input—gold. This allows them to compete more effectively on pricing while maintaining healthy margins. The capital freed from reduced inventory holding costs can be reinvested into differentiation strategies such as design, customisation, and customer service—areas where local players often excel.
Jewellers who actively promote GMS 2.0 will gain significant first-mover advantages. The scheme drives footfalls, as customers visit specifically to monetise old gold. This creates multiple touchpoints for cross-selling new jewellery, custom orders, and maintenance services.
Non-participating jewellers risk losing market share as competitors establish themselves as comprehensive gold solutions providers.
The IBJA’s proposed commission structure further incentivises rapid adoption. With jewellers earning nearly 1% on the value of gold collected, the scheme becomes a profitable service line in its own right. This incentive alignment is expected to drive a significant redistribution of market share towards organised players who embrace the scheme, potentially accelerating the formalisation of the unorganised sector.
The success of GMS 2.0 hinges on execution. Transparency in purity checks and robust digital tracking mechanisms are critical to overcoming household reluctance. Customers need assurance that their gold is being valued fairly and that the process is secure. The industry must also navigate the implementation timeline, which may face political and regulatory hurdles.
However, the potential rewards justify the effort. For jewellers, GMS 2.0 offers a path to lower costs, new revenue streams, and deeper customer relationships. For the economy, it presents a solution to a chronic external sector vulnerability. And for households, it provides a way to put idle wealth to productive use without sacrificing the cultural and emotional value of their gold.
As India navigates geopolitical uncertainties and fiscal pressures, unlocking the value of its household gold through a trusted, jeweller-led monetisation scheme could be one of the most significant financial reforms of the decade. The stakes are high, but so is the opportunity.
