The government of India has been making changes in its financial sector, first with its cash notes, and now with the gold market.

A few months ago, India banned all cash transactions of what it called “large bills” to ostensibly reign in its black market by forcing more people to use credit. The 500-rupee and 1,000-rupee notes were withdrawn from circulation, and a ban was placed upon them. What’s more, this represents about 86% of the cash in the market. Although it is well known that India is a land that loves gold and hordes it, thereby leaving many with stored wealth, the cash change really hit the poor hard.

Well, the government of India is back with new rules, but this time it directly affects gold. Bloomberg reports:

India, which vies with China as the top consumer of bullion, is working on new policies to improve transparency and help expand its $19 billion gold jewelry industry, according to people with knowledge of the matter.

The plans being worked out by the finance and commerce ministries along with industry groups should be finalized by the end of March, the people said, asking not to be identified because they aren’t authorized to speak publicly….

The start of a spot bullion exchange, to make gold supply more transparent and help enforce purity standards, is under consideration, the people said. An import tax of 10 percent could also be reduced as the government seeks to eliminate smuggling, they said. The plans also include a dedicated bank for the jewelry industry, according to one of the people.

The overhaul of India’s disorganized and fragmented gold jewelry industry is meant to bolster confidence among consumers, where the gifting of gold at weddings and festivals or its purchase as a store of value are deeply held traditions. Ensuring quality standards and allowing supply chains to be easily tracked are ways to enhance trust.

Bloomberg went on to report: The government is also keen to get the public to recycle its jewelry to reduce the nation’s reliance on imports. After a slow start to its plans to monetize the precious metal held in households and institutions, the government is looking to tweak the scheme and attract more participants, the people said, without giving details. The initiative, launched in November 2015, was aimed at returning an estimated 20,000 metric tons of idle gold to the financial system.

This doesn’t quite sound like the FDR executive order that forbade US citizens from hoarding gold back in 1933, but maybe India will add to this ruling soon.

Over time, this could backfire on the government. The tradition of owning gold in India is centuries long, and could very well drive up the price for everybody. Whether you’re in India or the USA or anywhere in between, having gold as part of your investment portfolio is a wise idea.