India's Bullion Industry Wants To Turn Household Gold Into Working Capital

India's gold imports hit a record $71.9 billion in FY26, up 24% year-on-year, and the pressure on the rupee and balance of payments has pushed bullion and jewellery industry bodies to put forward a detailed set of proposals aimed at unlocking idle household gold and reducing dependence on overseas supply.

The suggestions have been shared with the government and the Reserve Bank of India and range from restructuring the gold metal loan mechanism to bringing jewellers into a revamped gold monetisation scheme and cutting taxes on returns from gold deposits.

What Is Being Proposed

The Precious Metals Refineries Forum has put forward a two-track gold metal loan structure. Imported gold would be used to offer one-year loans to jewellery exporters, while locally refined bullion sourced from household deposits would fund loans to domestic jewellers and retailers. Under this model, depositors would earn 2 to 2.5% on their gold, with the gold metal loan interest set at 3 to 4%.

For the system to function like banking, the forum said natural hedging is essential. That means simultaneous deposits and loans, bank participation, vaults across multiple locations and loan renewals similar to working capital credit facilities.

On the tax side, the forum is asking the government to remove the 3% notional GST loss that occurs when physical gold is converted into electronic gold receipts. Currently, that tax hit discourages households from depositing gold digitally.

Jewellers As The Missing Link

Rajesh Rokde, chairman of the All India Gem and Jewellery Domestic Council, said past Gold Monetisation Schemes failed largely because jewellers were kept out of the process. He estimates that 10 to 20% of gold held by Indian families is in bullion form, and most of it sits idle because owners expect prices to rise.

Bringing jewellers into a transparent, regulated deposit system could mobilise a meaningful chunk of that gold and reduce import volumes significantly.

C. Vinod Hayagriv, Managing Director of C. Krishniah Chetty Group, put the number in context. India imports roughly 800 tonnes annually and around 200 tonnes is believed to be locked away each year as passive bullion investment by individuals. A structural reform requiring raw bullion sales only to registered buyers could immediately tighten that channel, he said. The gems and jewellery sector contributes nearly 7% to India's gross domestic product and supports over 5 million jobs.

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Industry Pushback On Consumption Curbs

The proposals come days after Prime Minister Narendra Modi urged citizens to reduce gold purchases and international travel for a year to ease pressure on foreign reserves. Industry bodies pushed back on the demand-side approach, arguing the real solution lies in mobilising existing gold rather than suppressing demand.

Sources:

Economic Times

The Hindu