Gold with buybacksGold with buybacks

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The Reserve Bank of India (RBI) is the The Reserve Bank of India (RBI) is the single largest holder of gold with reserves single largest holder of gold with reserves of 558 tonnes. of 558 tonnes.

A SBI official told Financial Chronicle that A SBI official told Financial Chronicle that the bank does not procure gold from the bank does not procure gold from jewellers but accepts deposits of gold jewellers but accepts deposits of gold bars, coins, jewellery in scrap form under bars, coins, jewellery in scrap form under the gold deposit scheme (GDS), which has the gold deposit scheme (GDS), which has been approved by the central bank. been approved by the central bank.

Since the relaunch of the scheme in March Since the relaunch of the scheme in March 2009, the Hyderabad circle has been the 2009, the Hyderabad circle has been the centre that mobilised the largest amount of centre that mobilised the largest amount of gold, collecting about 2,527 kg, followed gold, collecting about 2,527 kg, followed by the Mumbai region with 1,080 kg and by the Mumbai region with 1,080 kg and Ahmedabad region with 985 kg. Ahmedabad region with 985 kg.

The SBI official said, “More emphasis is The SBI official said, “More emphasis is being given to sale of gold. And as a being given to sale of gold. And as a result, the deployment of GDS gold has result, the deployment of GDS gold has increased from 4,737 kg (76 per cent of increased from 4,737 kg (76 per cent of total GDS deposit) as on end of March 31 total GDS deposit) as on end of March 31 to 6,512 kg (88 per cent) at the end of to 6,512 kg (88 per cent) at the end of August.  August. 

The gold mobilised under this scheme is The gold mobilised under this scheme is deployed under metal gold loans and deployed under metal gold loans and manufacture of gold coins. manufacture of gold coins.

Gold investments are sharply increasing Gold investments are sharply increasing with registered sale of gold being about with registered sale of gold being about 27.099 tonnes up to August, against 27.099 tonnes up to August, against 18.126 tonnes during the corresponding 18.126 tonnes during the corresponding period of last year. period of last year.

The year-on-year growth up to August is The year-on-year growth up to August is 49 per cent.” 49 per cent.”

This Diwali, the bank has already begun This Diwali, the bank has already begun marketing its retail gold coin scheme to top marketing its retail gold coin scheme to top companies by writing to the companies companies by writing to the companies and also marketing it through the bank’s and also marketing it through the bank’s two verticals – mid-corporate group (MCG) two verticals – mid-corporate group (MCG) and the corporate accounts group (CAG). and the corporate accounts group (CAG).

Among leading gold non-banking finance Among leading gold non-banking finance companies (NBFCs), Manappuram companies (NBFCs), Manappuram Finance and Muthoot Finance hold large Finance and Muthoot Finance hold large chunks of gold in their vaults. chunks of gold in their vaults.

Thomas George Muthoot, director, Thomas George Muthoot, director, Muthoot Fincorp, told Financial Chronicle, Muthoot Fincorp, told Financial Chronicle, “We hold gold as a security. “We hold gold as a security.

Two of our companies Muthoot Fincorp Two of our companies Muthoot Fincorp and Muthoot Finance together have 160 and Muthoot Finance together have 160 tonnes of gold.” tonnes of gold.”

I Unnikrishnan, managing director, I Unnikrishnan, managing director, Manappuram Finance, said his company Manappuram Finance, said his company holds about 60 tonnes. “These are mainly holds about 60 tonnes. “These are mainly in the form of jewellery held against loans in the form of jewellery held against loans sanctioned,” he says. sanctioned,” he says.

All other NBFCs hold around 30 tonnes of All other NBFCs hold around 30 tonnes of gold between them. Private and public gold between them. Private and public banks hold about 250 tonnes of gold for banks hold about 250 tonnes of gold for the gold loans that they sanction where the gold loans that they sanction where the yellow metal is held as a security. the yellow metal is held as a security.

Public and private sector banks together Public and private sector banks together hold about 250 tonnes through the hold about 250 tonnes through the business of loans against gold.business of loans against gold.

Among the commercial banks, only SBI is Among the commercial banks, only SBI is allowed to buy back gold with a minimum allowed to buy back gold with a minimum quantity of 500 gm. All other banks that quantity of 500 gm. All other banks that are selling gold in the domestic market are selling gold in the domestic market depend on imports depend on imports

During 2010-11, SBI imported 35 tonnes, During 2010-11, SBI imported 35 tonnes, while Axis Bank imported 30 tonnes, while Axis Bank imported 30 tonnes, HDFC Bank imported 20 tonnes and HDFC Bank imported 20 tonnes and Corporation Bank imported 9 tonnes.Corporation Bank imported 9 tonnes.

To reduce the gold imports to save foreign To reduce the gold imports to save foreign exchange, RBI is likely to give banks the exchange, RBI is likely to give banks the permission to buy back gold from retail permission to buy back gold from retail investors and other investors in the investors and other investors in the domestic market. domestic market.

Now, although, the banks are allowed to Now, although, the banks are allowed to import and sell gold, they are not allowed import and sell gold, they are not allowed to buy back gold.to buy back gold.

The bullion business of SBI consists of The bullion business of SBI consists of sale of gold (wholesale), importing gold sale of gold (wholesale), importing gold from overseas bullion banks and sell it to from overseas bullion banks and sell it to bullion dealers and jewellery bullion dealers and jewellery manufacturers. manufacturers.

Under the gold deposit scheme, gold in Under the gold deposit scheme, gold in bars, coins and jewellery, among others bars, coins and jewellery, among others are accepted in scrap form from resident are accepted in scrap form from resident individuals, temples, and trusts. individuals, temples, and trusts.

To buy the gold, the customer has to open To buy the gold, the customer has to open an account with the designated branch an account with the designated branch before booking gold. The branch has to before booking gold. The branch has to ensure compliance of all KYC norms while ensure compliance of all KYC norms while opening the accounts. opening the accounts.

The sale of gold coins are offered through The sale of gold coins are offered through designated branches and branches designated branches and branches engaged in selling of coins are known as engaged in selling of coins are known as point of sale branches (POSBs) point of sale branches (POSBs)

““We have 54 branches authorised for the We have 54 branches authorised for the gold deposit scheme, 42 branches for sale gold deposit scheme, 42 branches for sale of gold (wholesale) and metal gold loans of gold (wholesale) and metal gold loans and 1,187 branches are (POSBs) for sale and 1,187 branches are (POSBs) for sale of gold coins.” of gold coins.”

Metal gold loans in metal form (gold) are Metal gold loans in metal form (gold) are given to domestic jewellery manufacturers given to domestic jewellery manufacturers and jewellery exporters to enable them to and jewellery exporters to enable them to make jewellery. make jewellery.

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