India wants people to turn in their gold

India’s Prime Minister Narendra Modi has launched a program to lure tons of gold from households into the country’s banking system. The program consists of three schemes; a gold monetization scheme, gold sovereign bonds and Indian gold coin.

The gold monetization scheme aims to unlock about 20,000 tons of gold worth over $800 billion lying idle in homes and temples. Under the plan, banks will collect gold for up to 15 years and pay 2.25-2.50 percent interest per year. This is higher than previous rates of around one percent. The government hopes that higher interest rates will help in mobilizing the gold as previous attempts have been unsuccessful.

"Gold is a security, it gives you earnings and now on it is going to be a part of our nation building," Modi said.

By launching sovereign gold bonds with 2.75 percent interest, Indian authorities hope to cut the physical buying of the precious metal.

Modi has also unveiled the first Indian gold coin which is initially to be available in denominations of 5 and 10 grams.

The program wants to cut the country’s reliance on gold imports, estimated at around 1,000 tons a year.

"The government wants to reduce the reliance on gold imports over time," an Indian finance ministry official said.

The Prime Minister said the country has overtaken China as the world's largest gold consumer, buying 562 tons so far this year, against China's 548 tons.

In 2013, India’s budget deficit hit a record $190 billion. The deficit was due in part to Indians spending a lot of money on gold imports. The government was forced to hike its duty on imports to a record 10 percent. Imports of gold fell to $34 billion in 2014-2015.

Indians are known for their obsession with gold, which is seen as symbol of social status and prosperity. Gold is widely used for wedding gifts, religious donations and as an investment.