Ten days ago, it was a tongue in cheek suggestion that the Reserve Bank of India should lease their gold in a last ditch effort to procure much needed USD and keep the economic engine going. Then it was an offer so good [4], the citizens could simply refuse (or maybe not if it was enforced) that the millions of ounces of local wealth preserving gold be converted into Rupees in a wholesale gold purchasing campaign by the domestic banks. Now, the India Times, reports that as the dollar-starved desperation deepens, the local central bank is "discussing with banks on how to convince temple trusts to deposit their hoard of idle jewellery that could be converted into bullion." In other words, the government is going for the sacred gold which will be sold to keep the petrodollar economy functioning for another several months. Surely, yet another "transitory" measure.
From the Times of India [5]:
With all efforts to arrest the rupee's slide coming to a naught, policymakers now plan to knock on the doors of temples - from Tirupati to Shirdi - seeking a boon to feed Indians' fetish for gold without importing it.
The Reserve Bank of India, which has been making gold imports more difficult through a series of restrictions, is discussing with banks on how to convince temple trusts to deposit their hoard of idle jewellery that could be converted into bullion, said two bankers familiar with the matter.
They refused to be identified because of the sensitive nature of the issue. The Tirupati temple in Andhra Pradesh, Shirdi Sai Baba temple in Maharashtra, Siddhivinayak at Mumbai and Padmanabhaswamy temple in Thiruvananthapuram are among the richest in India with huge reserves of gold and precious metals.
The gold in question is copious:
The roofs of many temples, such as the Nataraja temple in Chidambaram, Tamil Nadu, and Tirupati are covered with gold. RBI is counting on banks handling the accounts of these temple trusts to convince them to convert their huge gold deposits into cash, the bankers said.
Tirupati is among the world's richest temples with an estimated gold hoard of about 1,000 tonnes, nearly double of India's estimated imports this year. The country, as a whole, is estimated to have a gold stock of 18,000-30,000 tonnes. The temple trusts, however, do not seem inclined towards such a plan, at least for now.
Still, such a proposal will hardly be met with enthusiasm:
There is no certainty of any deal with the temple trusts, given the diverse nature of these trusts and the local politics involved. "The idea is that a designated bank may buy gold from a temple trust and the ornaments will be converted into bullion. These may be bought by RBI by selling rupees," said one of the bankers quoted above. RBI did not respond to an email seeking comment.
Gold imports worth $53.6 billion last year are blamed for the rupee's slide, accounting for 61% of the current account deficit in fiscal 2013. Although the government and RBI acknowledged that high inflation provoked investors to chase gold, both have of late been trying to discourage imports of the precious metal. The rupee lost nearly a quarter of its value this year, but has since recovered.
"The finance minister and RBI governor should jointly - and immediately - approach the trustees of Tirumala Tirupati Devasthanams (TTD)," said Jamal Mecklai, chief executive of Mecklai Financial. "Three of these (trustees) are state government appointees, and given the current political dispensation this is a distinct advantage. They should, of course, offer prayers. That will be an opportunity for the hugely rich trusts to make additional amounts of money."
It would be ironic if the central bank religion suddenly finds itself under the control and sway of trua religion, in this case that of Hindusim. The only question that remains is on whose side would any specific enforcer of such a plan - in this case the military - be should the RBI indeed proceed down this path.