India is the largest importer of gold, which is its second biggest import item after oil and contributes around 10 per cent to the total import bill.
Large gold imports are a worry for the government and the RBI, with the current account deficit shooting to a record high in the September-quarter, pressuring the rupee and adding to inflationary pressures.
The RBI plans to mobilise the unused gold by lending it to importers and exporters of the yellow metal, in a move it hopes will bring down the demand for physical gold.
It wants banks to encourage products linked to accepting physical gold as deposits, invest public money in gold related products, and extend loans against gold as collateral.
Indians own about 20,000 tonnes of gold, or three times the holdings of the US Federal Reserve, in jewellery, bars and coins.
“Overnight there won't be any reduction in imports, but people need to be made curious about new products,” the RBI official with direct knowledge said. “The main conduits of gold imports are banks, forming 50-60 per cent of the total imports and supplies to jewellers. The way banks are suffering from huge NPAs (non-performing assets), this is a good product to work on."
The RBI is likely to release its final report on issues related to gold imports and gold loans mid-next week, the official said.
The RBI is designing products that could replace physical gold demand to yield similar returns, with easy liquidity, and documentation.
Indian banks' total gold loans are worth Rs 1 trillion. Manappuram Finance and Muthoot Finance, two of the top gold loan financing institutions, together have loan books of Rs 500 billion, the official said, indicating a large business opportunity.
"The problem of gold imports can be solved only when the economy enjoys inflationary and macroeconomic stability," added the official.
Headline inflation has been above 7 per cent in the last three years, prompting savers to invest in gold, stocks and real estate, which yielded higher returns.
The RBI estimates gold imports to fall 25 per cent in 2012-13 to 750 tonnes from a record of 1,079 tonnes in the previous year due to high import duty, a jump in prices, slowdown in economic growth, and a month-long jewellers' strike.
India's current account deficit would had been lower by $6 billion at 3.9 per cent in 2011/12 instead of 4.2 per cent, had imports grown by an average of 24 per cent instead of 39 per cent, the RBI said in a recent report.
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