By Ashvin Parekh, Managing Partner, Ashvin Parekh Advisory Services LLP
India’s household gold holdings vastly exceed the scale of infrastructure funding requirements. Recent estimates peg household gold at around 30,000-34,600 tonnes, valued at $3.8-5 trillion (Rs 357-470 lakh crore) amid record prices, while infrastructure needs range from $1.4-2.2 trillion (Rs 132-206 lakh crore) through 2030. This article discusses the monetisation potential of exchange-traded funds (ETFs) and other schemes to channel idle assets productively.
Let us turn to our infrastructure funding needs. For an economy that is estimated to be around $7 trillion according to CRISIL and some government and regulatory bodies, the need for infrastructure funding would be roughly $2 trillion. The current gap exceeds 5% of GDP annually, despite record central government capex of Rs 11.21-12.25 lakh crore ($128-135 billion) for FY27. Private participation has lagged, necessitating alternative domestic sources like gold.
The gold held by households, valued at $3.8 trillion at recent prices, accounts for 89% of GDP as of late 2025. It is potentially over $5 trillion at peak prices near $4,550/ounce. This stockpile, mostly idle bullion and jewellery, represents untapped liquidity equivalent to or exceeding India’s nominal GDP of $4.1 trillion. ETFs already enable partial conversion, but uptake remains low at under 5% of holdings.
Temple & Trust Dilemma
It is very interesting to note that Indian religious and charitable trusts, primarily temples, hold at an estimated 2,500-4,000 tonnes of gold, worth $150-240 billion at current price (8-12% of the total gold held), much of it idle in vaults from centuries of donations. If these entities are mandated to have financial assets like gold ETFs it could support the economy in developing infrastructure. However, the legal protection for religious endowments makes it a difficult proposition and voluntary monetisation occurs sparingly. Under Section 11(5) of the Income Tax Act, public charitable/religious trusts face “invalid investment” curbs, prohibiting gold/jewellery except in the form of idols’ adornment or buying ornaments for deities.
There is no mandate to convert gold to financial assets (e.g. ETFs or gold bonds). Trusts enjoy autonomy via state endowments boards and the RBI’s gold monetising scheme saw minor deposits (e.g. 4.5 tonnes in Tirupati, 174 kg in Somnath/Ambaji).
Let us now look at one of the monetisation routes, namely ETFs. India’s ETF market is managed by asset management companies (AMCS). It has grown rapidly, with the ETFs seeing exceptional inflows amid high prices. As of early 2026, total ETF assets under management (AUM) exceeded Rs 10 lakh crore, gold ETFs alone reached Rs 1.85 lakh crore in January. This was driven by retail and institutional adoption. There was a record inflow of gold ETFs in January (Rs 24,000 crore). The gold held by AMCs reached 95 tonnes by end-2025. Even silver ETF, another asset which needs to be monetised, has seen unprecedented growth.
Redefining Sovereign Gold
The other monetisation route is sovereign gold bonds (SGBs). They have indeed underperformed expectations since 2015, mobilising modest quantities despite policy intent to tap household gold for economic growth. As of late 2025, outstanding SGBs were about 126-128 tonnes of gold, with government liabilities ballooning to Rs 1.5 lakh crore due to a price surge. A mobilisation of such a quantity pales against the 30,000-plus tonnes in household holdings.
The main reason for the scheme’s failure was its structure. High gold prices increased liabilities manifold, making the scheme costlier for fiscal financing than alternative approaches. Low awareness, preference for physical gold/jewellery, complex eight-year tenure with limited liquidity, and fewer tranches (down to two years) deterred investors. Gold ETFs outperformed, on the other hand, with excellent AUM growth.
One school of thinkers believes that creating a trustworthy infrastructure to ascertain and certify gold held by households in the form of jewellery could assist AMCs to mobilise a sizeable quantity of the physical asset. The BIS hallmarking system already provides a robust foundation for certifying household jewellery quality. Expanding it could unlock liquidity by enabling AMCs to onboard idle assets into ETFs or funds.
It would also provide an instrument that can be collateralised by the banking system for household funding needs. A dedicated infrastructure for certifying old jewellery via digital pop-ups, BIS centres, jewellery partnerships, and digital ledgers could assist purity/weight non-destructivity, issuing tradable certificates for ETF pledging or gold bond deposits. The Indian Association for Gold Excellence and Standards, an industry self-regulatory organisation, can complement this with ethical standards, potentially integrating with AMCs to create “certified gold pools” for liquidity without physical melting.
Fiscal incentives can also help households to offer their physical gold and tap ETFs to convert it to financial assets.
Promoting conversion of household gold into liquid financial asset will require regulatory safeguards for legitimate schemes. SEBI’s mutual fund regulations strictly require gold/silver ETFs to allocate at least 95% of the assets to physical bullion (of 99.5%-plus purity with 5% in cash equivalents for liquidity). Gold is stored domestically in vaults of certified and empanelled custodians, verifiable by audits and redeemable as physical metal in large units. This counters the “paper gold” myths which may prevail among investors.
There is a need to crack down on fraudulent entities. Regulators must act against non-Sebi-regulated entities peddling fake gold schemes, as they have eroded public confidence and diverted 8-10% of potential ETF inflows to scams. The RBI and SEBI have banned several fraudulent platforms (estimated to be above 500) since 2024. Enforcement requires
Al surveillance, mandatory hallmark unique identification, and discloser and jail term for violators to rebuild trust. Public campaigns highlighting ETF physical backing could sway households.
Last but not the least, building household confidence by way of transparent audits, published periodically, blockchain-tracked serial numbers for ETF gold, and incentives like priority redemption for certified jewellery deposits would differentiate regulated AMCs from Ponzi frauds, potentially unlocking at least 5% of the holdings.
India’s vast household gold holdings represent one of the largest untapped pools of domestic capital, yet instruments such as gold ETFs and SGBs remain limited in scale. Structural barriers including trust deficits, regulatory constraints, and a deep-rooted preference for physical gold continue to impede effective monetisation. Addressing this requires a coordinated policy approach focused on strengthening hallmarking systems, enabling seamless conversion into financial assets, enhancing investor awareness, and enforcing robust regulation to build trust in formal channels. Even a mobilisation of 5-10% of household gold could unlock substantial liquidity, offering a stable and reliable domestic source of funding to support India’s infrastructure ambitions.