However, banks hold the key here. They have said storage is a major issue.
According to the KU Rao Committee, which was set up by the RBI to address issues related to gold imports, 20000 tonnes of gold is lying idle in India.
Some banks like Indian Overseas Bank and Corporation Bank hold barely two tonnes of gold each in their gold deposit schemes.
If banks were to store gold, there would be requirement for additional space, implying more costs for banks.
"If banks were to incur additional cost of storage, the rate they will pay to both retail investors and fund houses is likely to come down," said a bank official.
To reduce gold imports, the government along with the regulators, need to put in place a lot of small things, which will both encourage investors to declare their existing gold holding and make them invest in it as a financial instrument.