On April 21, India celebrated Akshaya Tritiya, a day considered auspicious by Hindus for buying gold. But it's not the only such day of the year. Buying the yellow metal is believed to be propitious on Dhanteras, Diwali and ahead of most other festivals too. Little wonder then that Indians are the world's largest consumer of gold. The country imported about 850 tonnes of it in 2014-15, and officials estimate another 175 tonnes were smuggled in. The import figure for March 2015 alone was 121 tonnes, up from 48.5 tonnes in March 2014.
Despite the mammoth numbers, officially India holds a meagre 557.7 tonnes, globally 11th in official gold reserve in a list topped by the United States with 8,133.5 tonnes, according to the World Gold Council.
So where do all those hundreds of tonnes imported go? Largely into private lockers: about 22,000 tonnes of gold and gold jewellery are held by individuals, families, temples and other trusts-perhaps the largest gold reserve anywhere in the world. A significant share-estimated at more than 3,000 tonnes-of that is with temple trusts, in the form of jewellery for the idols, coins and gold bars, though no temple management is ready to put a figure on the value of the bullion. And yet, most of this is what economists call "idle" gold, which adds nothing to the economy. In fact, they are a drain. As a non-essential import item, gold accounted for 28 per cent of India's current account deficit-or the import-export imbalance-in 2012-13.
It is here that the Narendra Modi administration wants to cash in and turn them into operational assets. Starting May, the government plans to monetise the reserves by making them an investment option: depositing in banks to earn interest like a cash deposit would, opting for gold bonds that can be sold later, among others. Once with the government, these otherwise idle assets will help trim the gold import bill. And thereby help cut the deficit.
There are few takers for the scheme, however.
Temple trustees contend that gold piles in their vaults have come as offerings from devotees over centuries. Take the subterranean vaults of Sree Padmanabhaswamy Temple, Thiruvananthapuram, for instance. Its reserves are believed to be a treasure trove-of much greater value than what is reckoned as the richest Hindu shrine: the Sri Venkateswara Temple in Tirumala, Andhra Pradesh. The Sree Krishna Temple in Guruvayoor and Lord Ayyappa Temple in Sabarimala-both in Kerala-are said to have gold reserves worth thousands of crores.
But the Travancore, Cochin and Malabar Devaswom Boards that oversee 3,890 temples in Kerala are opposed to the idea. They fear the banks will convert them into gold bars, and that they would lose value. In fact, a source in Travancore Devaswom Board says gold ornaments donated by them during the India-China war were returned as bars that could not be remade as ornaments for want of skilled artisans. Some others are opposed to temples earning interest on gold offered to the deity.
Kerala Chief Minister Oommen Chandy, himself a Christian, has also opposed the gold monetisation proposal. "We will not allow the central government to touch the invaluable jewels of Sree Padmanabhaswamy Temple or any other places of worship without the consent of the devotees and temples," he has said.
One exception of sorts is the Tirumala Tirupati Devasthanams (TTD), which manages the famous Sri Venkateswara Temple in Andhra Pradesh and is said to be the world's largest holder of gold outside of the central banks. In recent years, TTD has started sending gold ornaments to the mint in Mumbai to be melted down into 22-carat coins. The coins are then sold to devotees worldwide.
The TTD has also turned over gold offered by devotees to banks, which is melted, purified to 0.995 grade at the mint and lent as gold bars to jewellers in lieu of interest. They are returned as gold, and not cash, when the deposit tenure expires.
The Anandji Kalyanji Trust, which manages 1,300 Jain temples in Gujarat's Bhavnagar district, has also deposited its gold reserves with banks for nominal interest, while others such as the Shri Arasuri Ambaji Mata Devasthan Trust, which manages the popular Ambaji Temple, and Shree Dwarkadhish Mandir Devasthan Samiti in Jamnagar, have evinced interest in the Gold Deposit Scheme.
Managers at Mumbai's Siddhivinayak Temple, meanwhile, welcome the idea with a caveat. "We will deposit our gold in nationalised banks if the policy is beneficial, safe and earns good interest," says Narendra Murari Rane, the temple trust's chairman. In fact, interest rates may be the key to unlocking a significant portion of this idle gold. "Banks will have to offer much more than the nominal 1 per cent interest," says Rajendra Jadhav, executive officer, Shri Sai Baba Sansthan, Shirdi.
But devotees are circumspect. "Temples earning interest on gold offered to gods is a sin," says a Mumbai gold trader whose family has donated 200 kg gold to temples over the years.
For the 29 government-controlled temples, managed by trusts under the Himachal Pradesh Hindu Public Religious Institutions and Charitable Endowments Act, 1984, there is a mechanism through which 10 per cent of the donated gold can be used for temple development activities and 20 per cent invested in State Bank of India's Gold Deposit Scheme. The temples can reserve a further 20 per cent and the remaining half will be purified with the help of the Metals and Minerals Trading Corporation and minted for souvenirs such as coins and mementos.
The government's scheme offers immense opportunity for India to monetise gold, valued at more than $1 trillion and held in private hands, to fund the nation's growth, says P.R. Somasundaram, managing director, India, World Gold Council, the global gold miners' lobby. Financial analysts say all gold received in donation should be melted, converted into bricks, bars or coins and put on online auction every month. The money received, they say, should go to the bank account of the religious trust concerned.
But what this transition in gold economy calls for, literally, is a leap of faith.