Bullion industry proposes plan to turn India's idle gold into working capital

EconomicTimes2026/05/12 00:30

By:EconomicTimes

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Mumbai: Conversations around recycling household gold and restricting end-use of imports are making a comeback amid sliding rupee and balance of payment deficit.

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Confining the use of imported gold to jewellery exports, involving jewellers in a gold monetisation programme, a gold metal loan (GML) that functions as bank cash credit, and cutting tax on interest earnings from gold deposits are among the measures proposed by leading bullion and jeweller lobbies to the government and the Reserve Bank of India (RBI).

The aim, though easier said than done, is simple: lower gold imports which surged 24% to a new high of $71.9 billion in 2025-26. India imported over 721 tonnes last fiscal.

The Precious Metals Refineries Forum (PMRF) has suggested a mechanism to give one-year GML from imported gold to jewellery exporters while extending GML from locally refined bullion from gold deposits to domestic jewellers and retailers to meet local demand. Here, depositors could be offered 2-2.5% and the GML interest pegged around 3-4%.

A seamless funding would require a small tweak in indirect tax to ensure GST refund when physical gold is converted to electronic gold receipts (EGR) held by households depositing their idle gold.

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"The 3% notional loss of GST amount on conversion puts off customers. The government can always recover the tax when EGR is converted back into physical gold for selling. Concessions on capital gains when deposit is encashed on maturity along with income tax relief on accrued interest could be considered," said James Jose, president of PMRF.

It is widely felt that unless gold deposit and loan work simultaneously like banking, institutions accepting deposits would be exposed to unmanageable risks from price and currency fluctuations. Thus, a natural hedging mechanism through loans, participation of banks, vaults in multiple locations, and GML renewals (like working capital ) against adequate collaterals are needed.

Over 30,000 tonnes of gold is with Indian families. Despite endless discussions resurfacing in times of trade deficits and capital outflows, a bankable, institutional mechanism to tap this asset is missing.

"I feel the schemes did not take off because jewellers were not part of them. About 10-20% of the gold with families would be in bullion form. Most don't sell, expecting prices to rise. If some gold can be tapped, if necessary purified and converted into digital gold in a system where jewellers are involved, imports would dip significantly," said Rajesh Rokde, chairman of All India Gem and Jewellery Domestic Council (GJC).

The collection and purity testing centres (Cptcs) and other agencies have assured that gold collected can be processed within 48 hours, handed over to logistics firms, and moved to secured vaults empanelled by banks, according to one representation.

"The industry has shown resilience in difficult times - be it the Gold Control Act, the 80:20 rule, or other challenging phases. It has worked together and adapted to changing circumstances," said Vipulbhai Shah, past president of the flagship organisation GJEPC.

Sources said a week ago, there were discussions on exports and monetisation at a meeting between members of the Indian Bullion and Jewellers Association (IBJA) and central bank officials. However, the IBJA spokesman declined to disclose the deliberations.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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Bullion industry proposes plan to turn India's idle gold into working capital

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