Prime Minister Narendra Modi's plan to bring idle gold from households and temples back into circulation through a gold monetisation scheme has yet to take off after its launch a month ago, taking the sheen off an attempt to reduce India's gold imports.
Only 400g of an estimated 20,000 tonnes has been deposited under the scheme in the first two weeks. So the government is trying to figure out how to convince Indians, whose love for the yellow metal has made India the world's largest importer, to invest.
Top finance ministry bureaucrat Shaktikanta Das, who chaired a meeting on Tuesday with bank representatives, told reporters it was "too early to pass verdict" on the scheme. They discussed boosting the publicity campaign and reaching out to temples that are repositories of tonnes of gold.
Mr Modi launched the scheme a month ago in a bid to bring down the gold import bill, which at US$31.2 billion (S$44 billion) last year is second only to oil imports.
Under the scheme, people can give their gold, including jewellery and coins, to banks for an interest rate ranging from 2.25 to 2.5 per cent on the value of gold in deposits of five to 15 years.
NOT ENOUGH PUBLICITY
No bank has sent me mail on this scheme, but I have got e-mail on a gold bond scheme. Where is the awareness? You don't expect people to proactively invest.
PROFESSOR JAYANTH VARMA, head of the India Gold Policy Centre at the Indian Institute of Management Ahmedabad
The gold is collected, tested and melted down at Collection and Purity Testing Centres, and refineries. It is then put back into circulation through the banks. At the end of the scheme, the depositor will get back the entire amount either in gold or cash.
Some recent tweaks to the initial scheme includehaving jewellers operate as collection centres and offering tax-free interest.
Those involved with the scheme said the poor response was due to operational problems such as delays in signing legal agreements between individual banks, gold collection centres and refineries.
There are also only around 33 testing centres in the country, with the government hoping to increase the number to 55 by the end of this year.
Professor Jayanth Varma, head of the India Gold Policy Centre at the Indian Institute of Management Ahmedabad, said there was lack of clarity on some aspects of the scheme.
"No bank has sent me mail on this scheme, but I have got e-mail on a gold bond scheme. Where is the awareness? You don't expect people to proactively invest."
The gold bond scheme, which was launched at the same time as the monetisation scheme, allows investors to buy the metal on paper instead of in its physical forms. It has had better response with 63,000 applications received for 917kg of gold in the first three weeks.