India will also launch a sovereign gold bond to lower physical demand.
Two-thirds of gold demand in India comes from rural areas where jewellery is a traditional store of wealth.
Gold demand will go up in the second half of this year.
India's gold imports could pick up in the next few months after slumping 81 percent in June as falling prices spur buying, a government source said, adding to New Delhi's anxiety over a record-low rupee and a wide current account deficit.
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