The Indian government is all set to announce a new scheme to utilise valuable gold lying locked up in our temples. According to a Reuters report, the Modi government will launch a scheme in May this year encouraging temples to deposit their gold with the government in return for interest payments. The government will melt the gold and meet the demand of jewellers, thereby reducing gold imports. This could go a long way in reducing our Current Account Deficit. Here is P Chidambaram explaining how that works.Temples are reportedly weighing the options of the new scheme, and are reported to have said that they will consider the scheme if they find it beneficial. We spoke to some gold commodity analysts, and here is why they think it is a good deal for the temples.Firstly, holding huge amounts of gold in temple vaults come with huge costs. The vaults have to be secure. This means incremental costs on security hardware, security personnel and even insurance premiums. If temples hand over their gold to the government, they will be able to cut down on security costs.Secondly, all the gold is just lying locked up in the vaults with no financial returns for the temples. Even a two percent interest in cash on the deposited gold would mean considerable profits for the temple trusts.Thirdly, the gold is redeemable. The temples could take back the gold from the government, in the same form, whenever they want it. So their gold is not going anywhere, and they will not be diluting any future profits from the appreciating value of the yellow metal.There are, however, some caveats. Temples would only be willing to do this for ‘incremental deposits’, which is the gold coming in regularly every day as donations from devotees. They will not be willing to donate artefact and crown jewels which they might have had in store for centuries. That’s why Kerala Chief Minister Oomen Chandy is not very happy with the media reports.Also, temples expect higher interest rates. A similar scheme was announced in 1999, but due to low interest rates it received poor response. Under the earlier scheme, government owned State Bank of India was only providing 0.75-1% interest.And then of course, there is the problem of devotees not agreeing to their gold being used to shore up the economy. If those who donate gold to temples don’t like this scheme, no temple may be willing to come forward to use the scheme.But targeting temples along will not be enough to have a significant impact on the economy. KP Jeewan, VP & Head Fixed Income, Karvy, says that the government should go beyond gold in temples. “Retail outlets and households which are holding huge stock of gold should also be encouraged to let their gold be utilised in the market in return for interest payments. This will make a huge positive impact on the economy,” he says.