In a constant gold rush, India turns to its temples

"This is not a regular gold coin that you would buy from a gold shop — it contains the Lord's blessing," a temple board member said, holding up a tiny coin, probably left by a devotee years ago. It eventually sold for four times its face value.

Wealthy Hindu temples such as this one are repositories for much of the $1 trillion worth of privately held gold in India — about 22,000 tons, according to an estimate from the World Gold Council. In 2011, one temple in south India was found to have more than $22 billion in gold hidden away in locked rooms rumored to be filled with snakes. Another has enough gold to rival the riches stashed at the Vatican, experts said.

But little of it is contributing to the Indian economy, and now Prime Minister Narendra Modi's government is looking to monetize India's vast hidden wealth. In coming weeks, the government plans to begin a program that will allow temples to deposit their gold into banks to earn interest and circulate in the economy, rather than sit idle in musty vaults. The gold, officials said, would be melted down and sold to jewelers.

India is one of the largest consumers of gold in the world, importing almost 1,000 tons each year. The nation's leaders have tried in vain to curb the nation's insatiable appetite. But now the government hopes to coax temples into parting with some of their gold to address the country's trade imbalance and protect its foreign exchange reserves.

Most of this temple gold is neither traded nor monetized, Finance Minister Arun Jaitley said in a budget speech in February. By contrast, the Indian government's gold reserves amount to only about 550 tons.

"Our hunger for gold had led to a severe current account deficit a couple of years ago because gold was the number two imported item after oil," said Gnanasekar Thiagarajan, director of Mumbai-based commodities consultancy Commtrendz. "Gold has consistently given good returns even as stock market and land prices have fallen, and has been the chosen mode of investing wealth among Indians."

Among the young and upwardly mobile urban professionals, he said, there has been a shift to what is called "paper gold" or gold mutual funds, instead of real gold. About $2.5 billion is invested in paper gold.

"But if the temples start allowing the government to melt the gold jewelry donated by devotees, will it hurt their religious sentiments?" Thiagarajan asked. "Will gold offerings slow down in the future?"

Many traditionalists, including the boards of many of the country's leading temples, prefer to have their gold locked up rather than circulating in the economy.

"The jewelry belongs to God. Why should the government melt it?" asked Chandan Male, 42, a businessman and devotee at the Siddhivinayak Temple. "By auctioning it, the jewelry is only circulating among the devotees."

Indians' love of gold dates back centuries, stemming from gold-giving rituals and gold-buying festivals. Brides are draped with gold, and gold-laden dowries are a traditional gesture that costs a life savings for many poorer families.

During a dramatic court battle in 2011 over the riches in the 16th-century Sree Padmanabhaswamy Temple in the southern state of Kerala, a Supreme Court team discovered $22 billion worth of gold.

This huge treasure trove — sacks of coins, diamonds and other jewelry, gem-encrusted ceremonial garb and solid gold idols lying in cavernous cellars — was revealed after the court ordered the vaults opened in response to a petition accusing temple officials of mismanaging the wealth.

Much of the gold had been deposited by the local royal family. A popular belief that the gold lay wrapped with dozens of venomous snakes underground kept robbers away. The image of a snake engraved on the wall fueled the popular lore.

"The myth kept the gold safe for centuries," said Ravi Varma Raja, 74, who was appointed by the royal family as the custodian of the vault keys until the court intervened.

"I am certain that 99 percent of the people would not like it to be melted," Raja added, reflecting how unlikely it will be for the temple to accept the government's plan.

A few temples already have deposited small portions of their gold in banks. In the past four years, Tirumala Tirupati Devasthanams, one of India's richest temples in the southern state of Andhra Pradesh, has deposited more than five tons in a state-run bank in a "gold for gold" program where the goods are melted down and held and the interest is paid back to the temple in gold.

"We receive interest not in cash but in gold. Had the devotees opposed, we would not be able to do this," said O. Balaji, the financial adviser to the temple.

Said Narendra Rane, the chairman of the Mumbai temple board: "I would not say that our gold is sitting idle." He said the money from the gold auctions funds charity projects. The temple was waiting to see what the government's interest rates would be before it decided whether to participate, he said.

At the Siddhivinayak Temple in Mumbai on Tuesday, thousands of worshipers waiting to pay homage to the elephant-headed god Ganesh stood in line in the heat watching curiously as the auction unfolded. There were bids on 352 gold items worth about $130,000, and 179 gold jewelry items were finally sold at the auction, bringing in $82,300 for the temple.

The wall and ceiling of the temple's inner shrine are plated with pure gold, and the Ganesh idol is adorned with exquisite jewelry. Over the decades, devotees have made generous offerings when their special prayers were answered.

Reena Awasthi, 48, beamed, holding a gold necklace with Ganesh engravings that she bought for $1,250. She buys gold every year on this day from the shops. This year, her shopping turned out to be very special, she said.

"Somebody's prayer was answered; some wish was granted and they gave this in gratitude to God. It has some sanctity and is more precious," Awasthi said.

Although some worshipers expressed doubts about the government's new plan, others were more pragmatic.