India targets temple gold hoard to rescue monetisation plan

Mumbai/New Delhi, Dec 4

India is trying to persuade rich temples to deposit some of their gold hoards with banks to revive a plan to recycle tonnes of the precious metal and cut gold imports, sources said.

The scheme has only attracted about one kg in a month, prompting the government to nudge temples through banks to hand over their treasures, the sources said.

India is the world’s second-biggest consumer of gold after China and its insatiable appetite meant imports of the precious metal accounted for 28 per cent of India’s trade deficit in year ending March 2013.

In a bid to reduce the economically crippling imports, PM Narendra Modi launched the much-publicised scheme to tap a pool of more than 20,000 tonnes of gold lying idle in homes and temples.

“Convincing retail consumers takes time,” said a senior official with a state bank, who declined to be named. “We’re planning now to focus on institutions like temples.”

But Mumbai’s two-century-old Shree Siddhivinayak temple, which is devoted to the Hindu elephant-headed God Ganesha, said it remained unconvinced about the benefits.

India’s temples have collected billions of dollars in jewellery, bars and coins over the centuries, hidden securely in vaults. Modi wants temples to deposit some of this with banks, in return for interest and cash at redemption. The government would melt the gold and loan it to jewellers.

India’s Economic Affairs Secretary Shaktikanta Das said in a Twitter post today that: “No one will be coerced to monetise their gold,” adding that the scheme was entirely voluntary and certain media reports to the contrary were false.

A finance ministry official said if banks fail to win over temples, the government could intervene directly by talking to temples as it is looking for a big boost to the scheme to keep both imports and the current account deficit under control.

Despite offering slightly better interest rates than past schemes, the government is finding it difficult to break families’ attachment to their jewellery. Gold is used mainly as wedding gifts, religious donations and as an investment.

Another reason for a lack of interest is that banks accept deposits only after they have been melted down, leading to a potential loss in weight due to impurities. Some devotees are also opposed to their offerings to temples being melted in the first place.