- The Padmanabhaswamy Temple in Thiruvananthapuram, Kerala, where enormous quantities of gold were found in the vaults in July 2011.
At a time when nothing seems to be able to stem the Indian rupee’s decline, a novel idea to boost the currency is doing the rounds: use the tons of gold stashed away in people’s homes and in temples.
The rupee sank to an all-time low of 65.56 for one U.S. dollar on Thursday (before recovering slightly Friday,) partly on fears that India will find it tough to finance its wide current-account deficit; the gap reflects the fact that India imports more than its exports.
To lower the deficit, the Indian government has announced several steps in recent weeks to reduce its imports, such as raising the import duties on gold.
But market experts aren’t so sure that high prices will deter India’s gold buyers, so some people have come up with an alternate solution: recycle the gold already in India.
India currently holds around 20,000 tons of gold, according to the World Gold Council. At current prices, that would be worth $950 billion.
A small piece of this gold – around 558 tons or 2.79% – is held by the Reserve Bank of India, making it the 11th largest official owner of gold in the world, according to data from the World Gold Council and International Monetary Fund.
The rest is held by households and individuals, in their homes or bank vaults, and by Indian temples, which have historically received gold bars, coins and even jewelry as donations from patrons.
There is no firm estimate of how much gold is held by Indian temples, but it is believed to be several thousand tons. In Sri Padmanabhaswamy temple in Kerala, where a large and intact hoard of temple treasure was discovered in 2011, there is estimated to be gold and jewelry valued at one trillion rupees (US$16billion.)
Jamal Mecklai, founder of Mumbai-based currency consulting firm Mecklai Financial, suggested that the Indian government should make use of some of this temple gold.
In a commentary published last week, Mr. Mecklai said the government should ask the Tirupati Trust Foundation, linked to the eponymous south Indian temple, to deposit its gold stock with India’s state-run banks.
Mr. Mecklai said the banks could pay the Tirupati Trust an interest for its gold, and then sell a large portion of the stock in the domestic market – thus ultimately, reducing the need to import. Mr. Mecklai estimated that the Tirupati Trust holds about 1,700 tons of gold, which would be worth around $81 billion.
On similar lines, an association of jewelers is suggesting that the government encourage individuals to deposit their gold jewelry with banks.
“If we will be able to bring out only 10% of the gold holdings, we don’t need to import any gold for the next two years,” Haresh Soni, chairman of the Mumbai-based All India Gems & Jewellery Trade Federation told India Real Time. Mr. Soni said he has submitted a plan to this effect to the government and some banks.
Indian banks already offer a so-called gold deposit scheme, in which they accept gold bars and jewelry from individuals and pay interest on it. But at the moment, banks require a minimum deposit of 500 grams of gold. Experts say this is too much to ask, since many individuals may want to deposit smaller quantities, say 100 to 200 grams.
Mr. Soni suggests that banks lower their minimum deposit required.
In another suggestion, London Bullion Market Association Chairman David Gornall told The Hindu Business Line newspaper that the Reserve Bank of India could swap the 200 tons of gold that it had bought from the International Monetary fund in 2009, for dollars. This will boost dollar inflows at a time, when foreign investors are taking out the greenback from the country.