India should bring household gold stock into financial system, say experts

India must accelerate efforts to channel large household gold holdings into financial instruments, former Union minister P P Choudhary and senior market participants said, warning that continued physical hoarding limits the metal’s broader economic contribution, PTI reported.Speaking at an Assocham event, Choudhary, a member of the Parliamentary Standing Commission on Finance, said deeper financialisation of gold could help reduce the country’s reliance on bullion imports and ease pressure on the current account deficit.He noted that the gems and jewellery sector contributes around 15 per cent to India’s merchandise exports and provides employment to nearly 5 million people.India’s households and temples together hold an estimated 50,000 tonnes of gold — valued at about USD 10 trillion — largely outside the formal financial framework, said Sriram Krishnan, chief business development officer at the National Stock Exchange.“We have the platform, we have the capability, we have the technology,” Krishnan said, calling for policy measures to remove barriers to dematerialising gold through Electronic Gold Receipts (EGR).EGR, a Securities and Exchange Board of India-backed mechanism, allows individuals to deposit physical gold and trade it on stock exchanges in a manner similar to shares. However, a 3 per cent GST levied when gold is surrendered under the EGR framework remains a key obstacle to wider adoption, he said, adding that the NSE has submitted a white paper suggesting possible solutions.The push for financialisation comes at a time when gold prices have surged about 30 per cent in each of the past two fiscal years, said Jitin Makkar, senior vice-president at ICRA Ltd.Despite the rally, jewellery demand has remained firm, with major retailers reporting double-digit revenue growth and expanding store networks by roughly 20 per cent in both FY25 and FY26.Gold loan exposure by banks and non-banking finance companies has also increased significantly, rising from around Rs 1 lakh crore to Rs 4 lakh crore in recent years, Makkar added.He said regulatory initiatives such as mandatory hallmarking and the introduction of Indian Good Delivery Standards have strengthened trust in domestically produced bullion and helped moderate import dependence to some extent.