1 May 2026
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Summary of this article
Industry body proposes Bullion Bank to mobilize domestic gold.
New framework aims to reduce India reliance on imports.
Household gold could earn interest instead of paying fees.
A proposal to create a regulated ‘Bullion Bank’ is currently being reviewed by the Ministry of Commerce and Industry. According to a report by Moneycontrol, representatives from India’s jewellery industry made the proposal to the Union Commerce and Industry Minister Piyush Goyal. Notably, the proposal was made by representatives from the All India Jewellers and Goldsmith Federation (AIJGF).
What Has AIJGF Proposed
The industry body has proposed a mechanism to lower India’s dependence on gold imports via the creation of a bank which mobilises India’s huge gold hoard. AIJGF has requested the ministry to put in place a framework for allowing households and institutions in India to lend the gold they hold back to the jewellery ecosystem, according to the report.
The report also mentioned that Goyal has agreed to set up a consultation committee to examine the proposed framework. And the committee is likely to have government representatives, stakeholders from the jewellery industry, bullion market, financial institutions and market regulators.
How Does The Proposed Bullion Bank Work
The bullion bank seeks to provide a centralised financial framework which can pool, standardise, settle, and lease domestic gold. Instead of relying on expensive foreign imports to supply the demand for gold, the bank would act as an intermediary. The World Gold Council estimates that Indian households, temples, and private institutions collectively hold an unparalleled stockpile of 25,000 to 27,000 tonnes. Amid the current rise in gold prices, this gold hoard is valued at nearly $3.65 trillion to over $4.3 trillion.
The industry body has also proposed to integrate gold exchange-traded funds (ETFs) with the framework. Gold ETFs hold physical gold with custodians, which remains idle, and new inflows add to the demand for gold. The proposal seeks to allow ETFs to lend 20-30 per cent of their gold holdings. Notably, the lending would be over-collateralised, insured, audited and marked to market daily according to the report.
The industry body has also proposed the creation of an inter-ministerial task force involving the Finance Ministry, Commerce Ministry and Ministry of Consumer Affairs, according to the report.
How Will Gold Investors Be Impacted
The creation of a bullion bank is likely to change how gold is viewed as an asset. Typically, physical gold is non-yielding and passive in nature. However, a bullion bank is expected to turn it into an active asset, wherein gold owners will be able to deposit their gold to earn interest instead of paying locker fees.
PM Modi’s Austerity Appeal
The proposal comes amid India’s focused efforts to reduce its import bill amid rising crude oil and gold prices. Earlier in May, Prime Minister Narendra Modi advocated ‘austerity’ and urged Indians to delay their gold purchases to lighten the burden caused by fresh imports of gold. The industry body is set to meet the minister again to further discuss the proposal, according to the report.
What is the primary purpose of the proposed Bullion Bank?
The proposed Bullion Bank aims to mobilize Indias massive domestic gold hoard to reduce the countrys dependence on expensive foreign imports.
How will the proposed Bullion Bank benefit everyday gold investors?
It will turn physical gold into an active asset by allowing owners to deposit their gold and earn interest instead of paying locker fees.
What role will gold ETFs play in this new framework?
The proposal suggests allowing gold ETFs to lend twenty to thirty percent of their idle physical gold holdings to the jewelry ecosystem.
