India is considering a radical plan to direct commercial banks to buy gold from ordinary citizens and divert it to precious metal refiners in an attempt to curb imports and take some heat off the plunging currency.
A pilot project will be launched soon, a source familiar with the Reserve Bank of India (RBI) plans told Reuters. India has the world’s third-largest current account deficit, which is approaching nearly $90 billion, driven in a large part by appetite for gold imports in the world’s biggest consumer of the metal.
With 31,000 tonnes of commercially available gold in the country – worth $1.4 trillion at current prices – diverting even a fraction of that to refiners would sate domestic demand for the metal. India imported 860 tonnes of gold in 2012.
“We will start a pilot project among some banks where we will allow them to buy back gold from individual households,” the source, an official familiar with the central bank’s gold policymaking, said. “This will start soon, we have discussed (it) with banks.”
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