Gold Coin / Bullion Scheme
The Gold Coin/Bullion Scheme, officially launched by the Government of India on 5 November 2015, was introduced as part of a broader initiative to mobilise idle gold held by households and institutions and to reduce India’s dependence on imported gold. It was launched alongside two other major gold-related programmes — the Gold Monetisation Scheme (GMS) and the Sovereign Gold Bond (SGB) Scheme. The Gold Coin/Bullion Scheme specifically aimed at providing Indians with access to certified, standardised gold coins and bullion of assured purity, issued by the government itself.
Background and Context
India is one of the world’s largest consumers of gold, importing between 800 to 1,000 tonnes annually. Gold holds deep cultural and economic significance in Indian society, serving as a traditional form of saving, investment, and collateral. However, this high demand for physical gold has often led to:
- Increased pressure on the current account deficit (CAD) due to large import bills.
- Idle gold holdings estimated at over 20,000 tonnes lying unused in households and religious institutions.
- Reduced circulation of capital in the productive economy.
In this context, the Government of India launched a series of gold-related financial instruments in 2015 to channel gold investments into formal and productive sectors. The Gold Coin/Bullion Scheme was designed to encourage citizens to buy official and hallmarked gold coins instead of importing or purchasing from unverified sources, ensuring quality and transparency in the gold market.
Objectives of the Scheme
The major objectives of the Gold Coin/Bullion Scheme were:
- To provide consumers with trustworthy, hallmarked gold coins bearing the national insignia.
- To mobilise gold within the domestic economy through formal channels.
- To discourage unofficial gold imports and reduce the trade imbalance.
- To promote transparency and standardisation in gold transactions.
- To offer investors a secure and government-certified alternative to private bullion or imported coins.
Key Features of the Scheme
- Issuing Authority:The scheme was implemented under the supervision of the Government of India and managed by the India Government Mint, operated by the Security Printing and Minting Corporation of India Limited (SPMCIL).
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Design and Branding:
- The gold coins were branded as Indian Gold Coins (IGC).
- The obverse of the coin featured the Ashoka Chakra (the national emblem) and the reverse displayed the image of Mahatma Gandhi.
- This design signified national identity and authenticity.
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Denominations and Purity:
- Coins were initially issued in denominations of 5 grams, 10 grams, and 20 grams (later extended to bullion bars of 50 grams and 100 grams).
- The purity of the gold was maintained at 24 carats (99.9% purity), adhering to Bureau of Indian Standards (BIS) hallmarking.
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Sources of Gold:
- The gold used for minting these coins was recycled domestically through the Gold Monetisation Scheme, thereby linking both initiatives.
- This ensured that part of India’s internal gold stock was brought back into economic circulation.
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Distribution and Availability:
- The Indian Gold Coins were distributed through the MMTC (Metals and Minerals Trading Corporation of India), a government enterprise.
- They were made available for purchase at MMTC outlets, select banks, and later through authorised jewellers and e-commerce platforms.
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Security and Packaging:
- Each coin came with tamper-proof packaging, unique identification numbers, and a BIS-certified hallmark.
- Certificates of authenticity accompanied every purchase, assuring buyers of purity and standard weight.
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Buy-Back Provision:
- MMTC and authorised agencies provided a buy-back facility, allowing investors to sell coins back at prevailing market rates, enhancing liquidity and trust.
Integration with Other Gold Schemes
The Gold Coin/Bullion Scheme was part of a three-pronged strategy launched in November 2015, comprising:
- Gold Monetisation Scheme (GMS): Encouraged individuals and institutions to deposit idle gold with banks in exchange for interest.
- Sovereign Gold Bond Scheme (SGB): Allowed investors to purchase gold in paper form, earning interest while avoiding physical possession.
- Gold Coin/Bullion Scheme: Provided a safe and certified avenue for those preferring physical gold investments.
Together, these schemes aimed to modernise India’s gold economy, mobilise domestic reserves, and curb excessive imports.
Advantages of the Gold Coin/Bullion Scheme
The scheme offered several economic and social advantages:
- Assured purity: Government-certified gold reduced the risk of adulteration and fraudulent sales.
- National branding: Promoted “Make in India” by minting gold coins domestically rather than importing them.
- Reduced import dependency: Recycling domestic gold helped lower India’s gold import bill.
- Investment safety: Hallmarked coins provided secure and reliable investment options.
- Integration with gold monetisation: The use of recycled gold ensured an efficient circular economy in the gold market.
- Buy-back liquidity: The ability to repurchase coins enhanced investor confidence and circulation.
Economic Significance
The Gold Coin/Bullion Scheme held considerable macroeconomic importance:
- It supported the government’s goal of reducing the current account deficit by substituting imported gold with recycled domestic gold.
- It promoted financial formalisation, bringing gold transactions under regulatory oversight.
- By encouraging the use of Indian-minted gold, it enhanced the domestic refining and minting industry, aligning with the ‘Make in India’ initiative.
- The scheme also contributed to price stability and better quality assurance in the gold market.
Challenges and Criticism
Despite its strengths, the Gold Coin/Bullion Scheme faced several challenges:
- Limited awareness: Many consumers remained unaware of the availability and benefits of Indian Gold Coins.
- Preference for traditional jewellers: A majority of buyers continued to purchase gold from established private jewellers.
- Limited distribution network: The reach of MMTC outlets and authorised agencies was restricted compared to private retail networks.
- Investment mindset: Indians preferred jewellery or unbranded bullion over coins for cultural and liquidity reasons.
- Low scale of recycling: The linkage with the Gold Monetisation Scheme remained limited due to low participation in gold deposits.
These factors hindered the widespread adoption of the scheme, despite its strong quality assurances and government backing.
Comparison with Other Gold Investment Options
| Aspect | Gold Coin/Bullion Scheme | Sovereign Gold Bond (SGB) Scheme | Gold Monetisation Scheme (GMS) |
|---|---|---|---|
| Form of Gold | Physical (coin/bar) | Paper/financial instrument | Deposited physical gold |
| Issuer | Government of India (SPMCIL/MMTC) | Reserve Bank of India (on behalf of Government) | Commercial banks (under RBI) |
| Return | Linked to market price only | Market price + fixed interest | Interest on deposited gold |
| Liquidity | High (physical resale) | Medium (tradable bonds) | Low to medium (lock-in period) |
| Risk of Theft/Loss | Yes | No | No |
| Purity | 24 carats, 99.9% | Not applicable | Refined and certified |
This comparison highlights that the Gold Coin/Bullion Scheme primarily targeted consumers seeking physical possession of gold, while the other two schemes catered to investors comfortable with financial or institutional forms of gold.
Implementation and Developments
After its launch in 2015, the Indian Gold Coin gained popularity among investors looking for authenticated gold products. MMTC expanded its sales network to include over 200 outlets across India, and coins were also made available online.
In subsequent years, the government explored strategies to improve awareness and link the scheme more closely with the Gold Monetisation Scheme to strengthen domestic gold circulation.
Conclusion
The Gold Coin/Bullion Scheme represents a significant step towards formalising and modernising India’s gold economy. By offering standardised, hallmarked, and domestically minted gold coins, the scheme sought to instil trust and transparency in the gold market while reducing reliance on imports. Although its adoption has been gradual due to entrenched consumer preferences and distribution challenges, it remains a crucial component of India’s broader gold management and financial inclusion strategy.
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