Rising import bill: Govt weighs fresh options to free household gold

Tue Apr 28 2026

The government is exploring fresh policy options to curb the runaway gold import bill, which has become a strain on the current account.

It may impose restrictions on “gold consignment imports,” through quantitative caps, increased customs duties, or both. Additionally, a fresh attempt may be made to facilitate use of household gold stocks for productive use, and to meet the demand from jewellers through new innovative schemes.

According to official sources, the Gold Monetisation Scheme (GMS), discontinued in March 2025, for medium- and long-term deposits, may be revived with more attractive terms for depositors, but with minimal potential cost to the government.

Proposal for easing moderation under consideration

A proposal for easing the monetisation process is under consideration, they added. One option being weighed, sources added, is a model suggested by the Indian Bullion and Jewellers Association (IBJA) where the government would not pay interest but depositors could still earn.

The IBJA had proposed to allow householders or investors to deposit gold with the proposed gold spot exchange against which exchange will issue them Electronic Gold Receipts (EGR) carrying market-deterined interet rates. The exchange could simultaneously launch a gold lending scheme to hedge the risks.

For the depositors, the asset will remain liquid as EGR will be tradable. A few months ago, the World Gold Council discussed the options and recommended that jewellers oversee the monetisation scheme.

The GMS, which was launched in November 2015, allowed deposits from households, trusts, and institutions, with minimum deposit of 10 gm of raw gold (bars, coins, jewellery without stones/metals). There was no upper limit for deposits.

Of three categories of GMS investmemts, short-term deposits (1-3 years) were managed by banks, while medium-term (5-7 years) and long-term (12-15 years) were handled by the government. In the case of the government-run schemes, interest rates were set by the government in consultation with the RBI. The schemes, however, failed to enthuse investors.

The government also stopped fresh issuance of sovereign gold bonds effective Budget FY26, as these had proven to be a high-cost borrowing for the government.

The plan to launch a revamped GMS and allow households to deposit gold with spot exchange is in the wake of rising imports of the metal and integrate gold into the formal economy.

Imports of precious metals (Gold and Silver) in numbers

Imports for gold and silver reached a new high of $84 billion in 2025–2026; this was around 11% of the country’s overall import bill of $774.9 billion. Gold-silver import bill increased by 65% during the last two fiscal years. Imports of silver rose from $4.83 billion in FY26 to $12.05 billion in FY26, up 150%. The falling dollar-rupee exchange rate exacerbated the problem.

Under the gold consignment imports facility, authorised banks and agencies like Gift City’s India International Bullion Exchange import gold, holding ownership until sale to the final customer. These shipments are via consignment or “back-to-back” methods.

The government reckons that just limiting gold imports is not a long-term solution, and the strategy mush involve channelsing gold for productive puposes and meeting demand from idle household gold.

A group of certified gold refineries under the Precious Metals Refineries Forum wrote to the government seeking an overhaul of the GMS so that idle gold could be lent to jewellers who would otherwise resort to imported metal. “The gold import bill can be curtailed by encouraging the recirculation of (a part of) idle domestic gold holdings, estimated to be 30,000 tonnes, lying with the households and religious institutions,” the forum noted. According to the forum, the proposed schemes have the ability to absorb 1% or 300 tonnes of gold annually, which can be leased to jewellers and lessen the demand for imports.

Instead of banks, regulators –RBI or SEBI — could overse the new GMS, the forum said. It recommended that the regulator create a portal that transparently displays information on gold acquired, the bank involved, and the amounts available for loan. Banks importing gold for lending to jewellers will turn to gold collected under the new GMS. As per the scheme, banks may provide gold metal loans (GML) from imported gold only for the export of jewellery. Another suggestion is to limit the import of gold on a consignment basis, where payment is made when such gold is actually sold.

Revising the GMS, however, may involve some issues including capital gain tax to be paid by investors. The effective gold import duty is 6% at present – 5% basic customs duty and 1% agriculture infrastructure cess. The duty was cut from 15% in July 2024 with a view to curb smuggling and encourage official trade.

Source: https://www.financialexpress.com