Following Prime Minister Narendra Modi’s call to reduce gold imports and foreign travel, major Indian bullion and jewellery bodies have submitted a new plan to the government and the Reserve Bank of India (RBI). The strategy aims to lower the nation’s trade deficit by tapping into the estimated 30,000 tonnes of gold sitting in Indian households.

This move comes after India’s gold imports jumped 24% to a record $71.9 billion in the 2025-26 financial year, with over 721 tonnes of gold brought into the country.

The New Strategy: Two Separate Systems

The Precious Metals Refineries Forum (PMRF) has proposed a two-track system to manage gold more efficiently:

• For Exporters: Imported gold should be strictly saved for jewellery exporters using one-year Gold Metal Loans (GML).
• For Local Buyers: Domestic demand should be met entirely by recycling household gold. This gold would be collected from citizens, refined locally, and sold back through jewellers and retailers.

Under this plan, people who deposit their idle gold could earn 2% to 2.5% interest, while businesses taking gold loans would pay an interest rate of 3% to 4%.

Fixing Why Past Schemes Failed

Previous government gold schemes failed to gain traction primarily because they left out local jewellers and lacked a proper banking structure. Without a joined-up system, institutions faced high financial risks from changing gold prices.

To fix this, trade bodies are calling for a complete system that includes:

• Direct involvement of trusted local jewellers. The schemes did not take off in the past because jewellers were not part of them. About 10% to 20% of family gold is held as bars or coins.
• Strong bank backing and secure storage vaults across the country.
• Tax incentives, such as removing the 3% GST loss when physical gold is converted into Electronic Gold Receipts (EGR), and offering income tax relief on the interest earned.

Industry Support

Industry experts say a smooth system is already possible. Collection and purity testing centres have confirmed that collected household gold can be processed within 48 hours and safely moved to secure, bank-approved vaults.

Representatives from the Indian Bullion and Jewellers Association (IBJA) recently held discussions with RBI officials to fast-track these changes.