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New Delhi: The Government of India has announced that a total of 37.81 tonnes of gold has been mobilised under the Gold Monetisation Scheme (GMS) up to March 2025. This information was shared by Minister of State for Finance Pankaj Chaudhary in the Rajya Sabha on Monday. The minister highlighted that the scheme, launched in 2015, aimed at tapping the vast reserves of idle gold held by Indian households, religious trusts, and other institutions, thereby reducing the nation’s heavy reliance on gold imports.
Gold Monetisation Scheme – Background and Performance
The GMS was introduced as part of the government’s broader strategy to monetise the enormous stock of privately held gold in India. With gold being a preferred asset class among Indian families, the scheme was designed to channel this dormant wealth into the formal financial system. Under GMS, individuals and institutions could deposit their gold with banks and earn interest on these deposits, while the gold could be used by the government to meet domestic demand, reducing the need for imports.
According to Pankaj Chaudhary, the mobilisation of 37.81 tonnes of gold under the scheme until March 2025 marks a considerable achievement in integrating idle gold into productive use. However, the minister also acknowledged that the cost of running the scheme had risen sharply due to the unprecedented rise in global and domestic gold prices.
Discontinuation of Medium- and Long-Term Deposits
The government, in response to increasing costs, decided to discontinue the medium-term (5–7 years) and long-term (12–15 years) deposit schemes under GMS from March 26, 2025. The steep rise in gold prices significantly increased the outflow required for interest payments and redemptions under these longer-tenure schemes, leading to a strategic reassessment of the programme.
Despite this discontinuation, the government continues to explore ways to encourage gold holders to participate in the financial system, though with a more cost-effective structure.
India’s Massive Gold Holdings
India is known for its deep cultural and economic attachment to gold. According to estimates by the World Gold Council, Indian households and religious institutions collectively hold an estimated 23,000 to 25,000 tonnes of gold, valued at approximately ₹1.4 lakh crore at current prices. This massive reserve remains largely outside the formal economy, posing both a challenge and an opportunity for policymakers. Mobilising even a fraction of this gold could reduce the country’s import bill and strengthen its financial stability.
Sovereign Gold Bond Scheme Performance
Alongside the GMS, the government introduced the Sovereign Gold Bond (SGB) Scheme in 2015, aimed at reducing physical demand for gold. The scheme allows investors to purchase bonds denominated in grams of gold, earning both interest and potential price appreciation, without the need to physically hold the metal.
As of March 31, 2025, the SGB scheme has mobilised 146.96 tonnes of gold through 67 tranches, with a total value of approximately ₹72,275 crore. Notably, 18.81 tonnes of gold under the SGB programme have already been redeemed by investors up to June 15, 2025.
The minister emphasised that the SGB programme has been instrumental in offering a secure, paper-based alternative to physical gold, while also reducing the country’s import demand for the precious metal.
Impact of Rising Gold Prices
Recent global geopolitical tensions and economic uncertainties have triggered a surge in gold prices worldwide. This rise has had a dual effect—while it increased the value of the gold mobilised under schemes like GMS and SGB, it also led to higher borrowing costs for the government, particularly through the interest payouts and redemption obligations linked to SGBs.
Minister Chaudhary noted that the government’s primary objective is to maintain low borrowing costs and ensure prudent debt management. As such, the decision to launch new tranches of SGBs will be made cautiously, taking into account prevailing gold prices and overall fiscal impact.
Government’s Borrowing Strategy
The government raises funds through a mix of instruments such as Government Securities (G-Secs), Treasury Bills, and Sovereign Gold Bonds, based on market conditions and cost-effectiveness. While SGBs and GMS have proven effective in mobilising domestic resources, their future course will depend on balancing investor returns with fiscal prudence.
Outlook for Gold-Linked Schemes
Experts believe that the discontinuation of certain deposit categories under GMS reflects a shift towards optimising the cost structure rather than a decline in the government’s interest in mobilising gold. With India’s demand for gold continuing to remain strong—both as an investment and a cultural asset—schemes like SGB are expected to remain relevant.
Moreover, as the government continues to promote digital and financial alternatives to physical assets, products like SGBs may evolve with enhanced features, including flexible tenures or variable interest components, to attract a broader investor base.
The Road Ahead
While 37.81 tonnes of gold mobilisation under GMS and nearly 147 tonnes under SGB are significant milestones, they represent only a small fraction of the gold reserves held by Indians. Policymakers face the challenge of creating more investor-friendly products that can compete with the emotional and traditional value associated with physical gold.
The recent performance of gold-linked schemes also underscores the importance of financial literacy and awareness. As investors increasingly seek returns and safety during uncertain times, gold—both physical and digital—remains a favoured asset. The government’s approach will likely combine cost-efficiency with innovative product designs to ensure greater participation in the years ahead.
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