The government of India may have finally gotten a break regarding its attempts to monetize the country’s vast quantities of “idle” gold.
While it is estimated that the public in India holds a staggering 20,000 metric tonnes of gold (or more), a considerable portion of these savings are actually used as religious offerings each year. Families take their gold jewelry and other precious metal ornaments to temples as donations. While these generous gifts help fund the temples, much of the gold ends up as a surplus. It has been reported that temples across India have some 5,000 tonnes of gold.
Over the past few years, the Indian government has pursued so-called Gold Monetization Schemes (GMS). The hope was that citizens flush with gold would deposit their bullion at banks in exchange for interest and other financial services. (A very slim portion of people in India have access to banking services.) Most people, especially the country’s many millions of small farmers, have been reluctant to opt into the GMS. Two prevalent complaints have been that 1) most of the schemes require depositors to register tax ID cards, and 2) citizens were unwilling to exchange their gold for fiat money.
Tapping the Temples
Beyond private citizens, the government’s GMS also targeted the incredible amount of gold held by temples. This was seen as more likely to work, considering that collective organizations like these religious institutions have a greater interest in managing their finances. Further, the terms of the GMS make a bit more sense to temples due to their far greater gold holdings compared to any individual. However, progress was very slow.
The plans to monetize the temples’ gold finally seems to be taking hold. One of the country’s (and the world’s) richest temples, the Tirumala (or Balaji) temple located in Tirupati recently made a sizable deposit of 1,311 kilos of gold with the Punjab National Bank (PNB).
Each year, the Tirumala temple takes in roughly a metric tonne (32,150.7 kg) of gold donations in the form of trinkets and ornaments. The bullion deposited at the bank was in the form of .995 fine gold bars.
According to the organization that manages the temple’s finances, known as Tirumala Tirupathi Devasthanam (or simply TTD), PNB offered the most attractive short-term (three-year) interest rate of 1.75%. Several addition tonnes of TTD’s gold held at other banks such as the State Bank of India (SBI) and the Indian Overseas Bank are also being consolidated under the new GMS terms. In comparison to PNB, SBI only offered 1% on short-term gold deposits, 2.25% on medium-term, and 2.5% on long-term deposits.
TTD has placed more than 5 tonnes of gold into the banking system to date. The organization expects to earn 800 crore rupees (over $120 million) in interest alone on this gold in 2016.
In addition, the Shree Siddhivinayak Ganapati Temple Trust in Mumbia, an organization similar to TTP, recently agreed to deposit 44 kilos of its gold ornaments on a medium-term basis with SBI. The agreement by these banks, including the Reserve Bank of India (RBI) to finally allow such deposits to be repaid in gold has made the arrangement more preferable to the temples—and to anyone else, for that matter. We will see if this trend now extends to the general public, as well.
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