New Delhi, Sep 9 (IANS): India on Wednesday approved a new sovereign gold bond scheme, as also a monetisation scheme to incentivise people to park their gold assets in a paper format and earn interest, while seeking to productively use vast amounts of this idle metal in the economy.

Under the gold bond scheme, approved by a meeting of the cabinet presided over by Prime Minister Narendra Modi, up to 500 grams worth of bonds per annum can be bought by an individual with lock-in of five-seven years and appropriate interest so that they are protected from volatility.

The gold monetisation scheme, also approved on Wednesday, calls for people to deposit their gold with authorised agencies for a short-, medium- or long-term periods, for which they will be given certificates of holding, Finance Minister Arun Jaitley said at a briefing.

"This will also bear interest," Jaitley said, adding: "This has been done to replenish the Reserve Bank's gold reserves."

According to the World Gold Council, an estimated 22,000-23,000 tonnes of gold is lying idle with households and institutions in India. The annual imports amount to around 850-1,000 tonnes valued at $35 billion to $45 billion.

Officials said the objective of these two schemes are three-fold: Mobilise idle gold with people, give a fillip to the gems and jewellery sector by making the metal available from banks on loan and reduce the reliance on imported gold and conserve foreign exchange.

In his budget speech on Feb 28, Finance Minister Arun Jaitley had said that the government will come up with two schemes for gold -- one on monetisation, or permitting gold deposits with banks on interest, and the other on redeemable gold sovereign bonds also with fixed interest.