India is considering a radical plan to direct commercial banks to buy gold from ordinary citizens and divert it to precious metal refiners in an attempt to curb imports and take some heat off the plunging currency, The Guardian said.

A pilot project will be launched soon, a source familiar with the Reserve Bank of India's (RBI) plan told Reuters, although the idea was met with some scepticism.

India has the world's third-largest current account deficit, which is approaching nearly $90bn (£58bn), driven mostly by the appetite for gold imports. That has played a major role in driving the rupee to a record low.

With 31,000 tonnes of commercially available gold in the country – worth $1.4 trillion at current prices – diverting even a fraction of that to refiners would sate domestic demand for the metal. India, the world's biggest consumer of gold, imported 860 tonnes in 2012.

The RBI will ask the banks to buy back jewellery, bars and coins for rupees. Lenders will have to offer better rates than pawn shops and jewellers to lure sellers.