India's policymakers have been facing an economic conundrum for more than a decade: there's a mountain of wealth literally greater than the country's GDP, yet of little avail in terms of economic growth. Now it is estimated that the Indian households, temples and institutions are holding somewhere between 25,000 and 35,000 tonnes of gold valued between $5 trillion and $5.4 trillion equivalent to roughly ₹415 lakh crore at the current gold prices. That's no static number either. Nearly a week after price hikes of over ₹31,600 per 100 grams in three trading sessions, the price of 24-karat gold on the domestic market is trading at around ₹1,55,130 per 10 grams on Thursday, with bullion markets around the world remaining above $4,400 an ounce as investors continue to rely on safe havens over the dollar. Each rupee that price adds only thickens a fat bank that for the most part just sits there.

This is the reason why it is worthwhile giving more importance to the Centre's renewed bid to correct the Gold Monetisation Scheme. Government officials have suggested for weeks that a reimagined version of the scheme, which was introduced in 2015, is on the verge of being unveiled, and for the first time jewellers will be recruited as collection partners, alongside banks. The reasoning is simple: banks alone never would be able to convince the public to give away grandmother's bangles. Jewellers already possess trust, retail outlets and purity-testing equipment; what they have been missing is a regulatory position. But if that is the case, it could be the mobilisation which finally makes a difference as industry groups like the All India Gem and Jewellery Domestic Council hope.

And it needs to. The numbers of the old scheme are not to be seen without embarrassment. The Gold Monetisation Scheme had collected only a rounding error of 38 tonnes by March 2025, against an estimated family stockpile well over 25,000 tonnes. Last year, the medium and long-term deposits windows were quietly abandoned because they did not get enough takers as depositors were requested to lock their inherited jewellery for varying periods of five to fifteen years. The account is only available for short-term deposits and most Indians are unaware of its existence, much less trust it, since the scheme involves selling gold jewellery into regular gold bars, breaking an emotional and cultural bond. People aren't not financially literate, they're not sentimental enough.

That's exactly the sell they are making which is gaining traction among financial technology firms and gold-lenders who have been developing an alternate path to the same end result for the past few years. A more effective approach is to allow individuals to borrow on their gold without depriving themselves of the possession of the jewellery, which is appraised, insured and returned to the borrower in full after the loan is repaid. It is this one design decision, the retention of ownership, and not its surrender, that accounts for the rapid growth of organised gold loans compared with gold deposits. The formal gold loan book in India has already reached the size of ₹16 lakh crore, or about 11 per cent of retail credit, and is fairly evenly distributed between banks and non-bank lenders, including the newer gold-loan fintechs based on app and doorstep. Yet the credit for only about 4 percent of gold owned by households is ever pledged.

The plumbing has been modified to accommodate the adjustments. This year the Reserve Bank of India unveiled a uniform tiered loan-to-value framework for all banks, non-bank lenders and cooperative banks to give customers taking loans for small quantum up to ₹2.5 lakh access to up to 85 percent of the value of the gold, reducing this to 75 percent for bigger loans above ₹5 lakh. The gold loan market is poised to reach a size of ₹4 lakh crore in the NBFC books alone by March 2027, at an annual growth rate of almost 40 percent, which is far higher than the growth rate of most other retail credit activities in India, says Credit ratings agency Crisil.

The consequences are far more than financial on the household level. Gold imports rose by about 24 percent in the previous fiscal year to reach $72 billion, nearly twice as much since FY21 and one of the largest items in the current account deficit. For every tonne of gold that is withdrawn from a bank locker and formally utilized via depositing a new gold monetisation or providing as collateral in a loan, India is not required to import fresh gold in theory. The PM's own call earlier this year to citizens to put off discretionary gold purchases, was essentially a call around this imbalance.

The projections are, let's be realistic, optimistic. The industry body ASSOCHAM has called for 2 percent of the unutilized gold (UG) held in unorganized hands to be put into the formal sector, which will contribute nearly $7.5 trillion to the India's economy in a decade. The World Gold Council, on its side, has taken it another step and recommended that the government withdraw from the management of the scheme altogether and leave the operational responsibility to private players and jewellers who know the customer better than any bank branch.

It is probable that what will determine whether deposits or loans or a combination of the two get to India will be just a behavioural test: will Indians be prepared to part with gold, even for a short while, unless they can continue to call it their own? All previous attempts which have taken these instincts for granted have gone astray and made little noise. Now are the schemes being discussed, which are apparently being worked out around it, not against it.