India to roll out gold monetization plan

India has a plan to pull more gold into its banks, and the general public is set to play a pivotal role in the program.

On Sunday Indian Prime Minister Narendra Modi said the scheme to "monetize" the precious metal could be ready in weeks.

Under the plan, people who own physical gold will be allowed to put their metal into banks and earn interest until it is withdrawn. The idea is to mobilize the thousands of tonnes of gold estimated to be sitting idle in Indian households.

"Please, don't let your gold be dead money," Reuters quotes Modi as saying. "Gold is very important for the country. Gold can become an economic strength for us."

India is the world's top consumer of bullion, with many Indians placing high value on the precious metal as jewelry, often given as a gift, and as a store of value.

The country consumes close to 1,000 tonnes a year, with most of the gold imported; the gold monetization plan is a way to keep the metal in the country and avoid a situation that occurred in 2013, when high gold imports pushed India into a record current account deficit of $190 billion.

In May the Economic Times reported that the Indian public hold 20,000 tonnes of the yellow metal in jewelry, coins and gold bars.

Gold has been pouring into India since the government a year ago scrapped gold import restrictions, including the 80:20 rule, which required gold traders to export 20 percent of the gold that they imported.

While India is the world's top gold consumer, it is in 10th position among the top 10 countries that hold the most gold in their central banks. The Reserve Bank of India holds 557.7 tonnes of the precious metal, compared to number 9, the Netherlands at 612.5 tonnes, and eighth-ranked Japan at 765.2 tonnes. The top 3 central bank gold hoarders are the United States at 8,133.5 tonnes, Germany at 3,384.2 tonnes, and Italy at 2,451.8 tonnes, according to Profit Confidential which recently compiled a list.