Such banks and agencies control about 56 percent of the gold imported into India, which vies with China as the world's largest buyer of the precious metal.

A ballooning current account deficit (CAD) is a major concern for the government, with gold imports the biggest contributor to imports after crude oil.

New Delhi has doubled the import duty on gold to 4 percent in its annual budget for 2012-13 in a bid to discourage imports.

"Setting value or quantum limits for canalising agencies and banks to import gold can also reduce the demand for gold. Such limits can be reviewed periodically," the Reserve Bank of India said in a draft report, which is open for public comments until January 18.

Separately on Wednesday, the federal government called for making gold imports more expensive to help address the current account deficit, which touched a record of 5.4 percent to gross domestic product in the July-September quarter.

The central bank's draft report said controlling excessive demand for gold could help check imports, suggesting banks introduce new gold-backed financial products.

Gold imports rose 9 percent to 223.1 tonnes in the July-September quarter, after a 56 percent fall to 131 tonnes in the April-June quarter.

Analysts predict a sharp recovery in the final quarter due to peak festival and wedding season buying.

The draft report said if gold imports in India had grown by 24 percent the average annual rise in global demand seen over the last three years instead of 39 percent in 2011-12, the current account deficit would have been $6 billion lower and the CAD-GDP ratio 3.9 percent instead of 4.2 percent.

India imported a record 967 tonnes of gold in 2011.

MONETISE IDLE STOCKS

The central bank recommended the use of 20,000 tonnes of idle gold stored by households in India, which is about three times the holdings of the US Federal Reserve, by introducing gold bonds, gold deposit schemes and tax incentives.

"The impounded gold through gold bonds can be used to reduce the demand for gold imports. There can be a lock-in period," the draft report said.

Indian banks might also consider expanding their share of gold jewellery loan portfolios to monetise huge stocks for productive purposes, the report said.

A working group at the central bank also asked for rationalisation of interest rates charged by non-banking financial companies on gold loans by imposing a cap on them.

Center>Copyright Reuters, 2013