SPY EYES

India’s central bank, the Reserve Bank of India, kicked up a storm after it asked select “rich” temples of India to declare the value of their gold holdings.

Temple boards, which manage temples in India, rejected the RBI’s request to furnish gold stock details while Hindu religious outfits threatened to launch a nation-wide protest on behalf of these temples.

The RBI is understood to have stepped back.

“We [the Hindu Parliament] had threatened to stage nation-wide protests on behalf of the temples against RBI’s stand. The temples are under no obligation to reveal any details to any government body. We have been openly saying that they are touching fire (with this move),” said Rahul Easwar, Secretary, Hindu Parliament, an outfit that has represented Hindu temples at various forums.

Speaking to Al Jazeera, Easwar, the grandson of the supreme priest of India’s famous Sabarimala temple, said: “The RBI has informed the Travancore Devaswom Board, which manages a thousand plus temples, including the Sabarimala hill shrine, that its earlier letter [seeking details about gold holdings] can be ignored.”

While the RBI officials were unavailable for any comments, unofficial sources confirm that an oral communication to this effect has issued to the temples, who are now demanding a written document as proof.

Who owns the gold lying idle in the vaults of some of India’s rich temples? Should India use this treasure trove to tide over its current economic crisis?

India’s Fort Knox

The US Bullion Depository Fort Knox’s website says it has 147.3 million ounces (4,603 tonnes) of gold holdings currently. Interestingly, according to the World Gold Council estimates, temples in India have about 2,000 tonnes of gold ($84 bn) and the Reserve Bank of India (RBI, June 2013 statistics) reported holdings of 557.7 tonnes of gold.

Statistics state that Indian temples possess the equivalent of half of what Fort Knox holds.

In 2011, gold worth $20bn was discovered in subterranean vaults at the centuries-old Sree Padmanabhaswamy Temple, in the southern state of Kerala.

According to unconfirmed figures, Tirupati Temple, which receives 10kg of gold every week, alone holds about 200 tonnes of gold in its vaults.

Most of the temple gold is donated by devotees either seeking blessings or favours of their revered gods and goddesses.

The temple boards are convinced that the RBI does not have any right over either the gold or the related accounts.

Lieutenant-Colonel Bhuvanendran Nair (retd), the executive officer of Sree Padmanabhaswamy Temple said, “.. .all this gold has been given to the temple by the devotees. It is the wealth of the temples. The currency that we get is used to run the temple, pay salaries and pensions of the priests, give food to the poor and other such activities. No one gives us [temples'] money. How else will we function? What will this little gold do to our economy and nation? We have taken a stand to not share any details with the RBI.”

India, soaking up a third of the world’s gold supply every year, is the world’s biggest importer of the yellow metal.

It imports billions of dollars worth gold every year and sends its own currency [the rupee, which has lesser purchasing power than the US dollar] overseas.

This disrupts the balance of money entering and leaving its economy. Thus, economists explain, the Indian rupee’s value has been depreciating.

Gold’s positive role

In the current scenario it is good to understand the positive role that gold plays in the global economy. Ecnomic value generated by the industry has a direct impact on the economies where gold production or consumption takes place.

Economists further elaborate, that owing to various socio-economic conditions as well as regulations, the 1.24 billion Indians equate stocks of the precious metal with savings and security even today.

For instance, the “not-so-well-off” part of the society finds it convenient to mortgage their gold savings with local money lenders than raising loans.

As a result, India’s import-export imbalance [or current-account deficit, CAD] in the first quarter of the current financial year was 4.9 percent of GDP ($21.8bn), double of what is considered to be “comfortable”.

Strikingly, gold, a non-essential import item, accounts for 80 percent of the country’s CAD.

Questioning the RBI’s move, India’s main opposition party feels that the apex body, in consultation with the central government, sought to check the rupee’s fall by buying these gold holdings from temples.

So, did the government retrace steps fearing protests just before the upcoming general elections in 2014?

“Nobody has the right to touch the temple gold. It belongs to the God and the devotees. Moreover, this Congress government did not leave coal [referring to the coal-blocks allocation scam], why will they not touch gold? Is an economic debate on behalf of a failed government just?” questioned Nirmala Sitaraman, National Spokesperson for Bharatiya Janata Party, India’s largest opposition party, which is often referred to as the political voice of the Hindu religious movements.

It is difficult convincing the devotees as well. Businessmen are known to donate huge amounts of gold belongings at various temples to win favours in business deals.

“I am honest to my God. I go and donate five percent of my profits from every deal to Lord Tirupati. And I pay taxes to the Indian government which is more than 35 percent. Why does the government want the God’s share too?” one such businessman, who did not want to be named, said.

Different school of thought

While the RBI has on records said that it sought all the information as a mere statistical measure, a different school of thought supports the use of temple gold to save India’s economy.

Som Prakash Yadav, president, Vishwa Drama Peetha, a Hindu organisation that claims to be propagating the essence of right knowledge, said: “I agree with the RBI completely. Our religion and scriptures never asked anyone to hoard gold. Kindly do not misinterpret religion.

“I do not understand why we import gold, will we die without it? India is a reservoir of gold; we have gold in our houses and at temples. But where is the use utility of this yellow metal? We are merely hoarding gold in the name of religion, God, rituals and sentiments. We are punishing the global economy with this wrong perspective.”

Houseds of worship such as the Shree Siddhivinayak Ganpati temple of India’s financial capital, Mumbai, and the Tirupati temple have already deposited gold into banks and are drawing interest on the same.

Bankers and lawyers feel there is no need to worry or create panic. For one thing, it is beyond the jurisdiction of the RBI to dictate terms to the temples.

For another since the ownership of the gold lies with temple trust boards, the RBI cannot “use” it.

“We need to understand that this gold cannot come to the RBI just like that. RBI cannot dictate things to the temples. The rules, regulations and the governing bodies are different. So, what is the problem? The temples can deposit their gold with the banks and earn interest. Moreover, the RBI cannot use this gold since the ownership lies elsewhere. My suggestion is to introduce gold bonds that temples can buy in place of keeping physical gold. Allow them to encash it at the market rate whenever they want to,” Jyoti Prakash Gadia, managing Director of Resurgent India, an investment bank, said.

P Chidambadam, India’s finance minister, has said at many forums that India aims to better its balance of imports and exports by cutting down the inflow of gold and silver into the country. How it will meet this goal is a question that remains unanswered given the gold obsession, reluctant rich temples, threats by Hindu outfits, sluggish growth and depreciating rupee.

Interestingly, the Indian law states that temple deities are perpetual minors and can have legal representation in courts through trustees or temple priests.

The learned argue: How can you take away the wealth of a minor without the consent of his/her guardian?