File photo of the Siddhivinayak Ganapati Temple in Mumbai. (Reuters)
The two-century-old Shree Siddhivinayak temple in Mumbai devoted to Lord Ganesha bristles with close circuit cameras and is guarded by 65 security officers.
It is one of India's richest temples, having amassed 158 kg of gold offerings, worth some $67 million or over Rs 417 crore, and its heavily guarded vaults are strictly off limits.
India is the world's biggest consumer of gold and ancient temples have collected billions of dollars in jewellery, bars and coins over the centuries. A few years ago, a treasure of gold worth an estimated $20 billion or over Rs 1,24,750 crore was discovered in secret subterranean vaults in the Sree Padmanabha Swamy temple in Kerala.
To help tackle India's chronic trade imbalance, PM Modi's government is reportedly planning to launch a scheme next month that would encourage temples to deposit their gold with banks in return for interest payments.
The government would melt the gold and loan it to jewellers to meet the seemingly insatiable consumer appetite for gold and reduce economically-crippling gold imports, which accounted for 28 per cent of India's trade deficit in the year ending March 2013.
India's annual gold imports of 800 to 1,000 tonnes could be cut by a quarter if temples decided to participate in the scheme, say government and industry sources.
"We would be happy to deposit our gold to nationalised banks if the policy is beneficial, safe and earns good interest," said Narendra Murari Rane, chairman of the trust for the Siddhivinayak temple, portions of which are gold-plated.
But a Mumbai-based gold merchant, who said he and his father had donated around 200 kg of gold to Siddhivinayak and other temples over the years, said it would be a sin for the temples to earn interest on the gold offered to the gods. "I make donations to God; not to any temple trust," the 52-year-old merchant said.
Key to the government's plan will be the interest rates offered for gold deposits.
A similar gold monetization plan launched in 1999 proved ineffective, in part because the interest rates offered on gold deposits were regarded by temple officials as too low.
Under that scheme India's top lender the State Bank of India offers 0.75 per cent to 1 per cent, and only 15 tonnes of gold has been deposited so far.
India raised the import duty on gold, the country's biggest non-essential import, and imposed other restrictions in 2013 after the current account deficit hit a record $190 billion.
If India can cut imports, that would pressure gold prices that fell to a four-month low last month before recovering. Lower gold prices will help India cut its import bill. However, a successful gold monetization scheme could also expose the government to potential risks, if gold prices were to take off and depositors decided to withdraw at the same time.
"There is going to be a lock-in period under the new gold monetizing scheme," said Sudheesh Nambiath, an analyst at precious metals consultancy GFMS. "Banks will have to replenish the stocks with imports later (if temples withdraw gold)."
© Thomson Reuters 2015