The Government and the RBI may have gone hoarse asking people not to buy gold. But the yellow metal holds a fatal fascination for Indians.
Be it coins/bars or jewellery, people continue to invest in gold, say bankers and jewellers. This is mainly because the precious metal is seen as the most liquid asset.
From gold coins that weigh just 2 gm to bars of 50 gm, some public sector banks sold more than a tonne of gold last fiscal. Now, with the Finance Minister suggesting that banks keep off selling gold coins, some banks are disappointed with a source of income shut.
Bankers say the demand for gold coins has always been huge.
“Sale of gold coins goes up during festival and marriage seasons,” says V. A. Joseph, Managing Director of the Kerala-headquartered South Indian Bank.
But going by what people say, gold needs no season. “I’ve always believed that I should not wait till my daughter is of marriageable age to buy ornaments. I try and make the purchase whenever we have some good chunk of money,” says Gowri, a homemaker from Coimbatore and mother of a seven-year old.
Exchange
Radha, an employee in a private firm, too likes gold but has a different take. She prefers gold coins. “Jewellery trend changes all the time, and am not too sure if my children will like the design I choose for them. So, I buy 4 and 8 gm coins, and exchange it for ornaments,” says she.
A manager of a rural bank branch from northern Karnataka says not many of his customers buy gold coins. But they do purchase gold ornaments during festivals.
BANKS SELL LESS
Going by the annual reports of some public sector banks, the number of and weight of coins sold during 2012-13 were less than in 2011-12.
However, the rising gold price meant a jump in turnover value, ergo earnings from this segment. Some banks such as Bank of Maharashtra started a gold coin-linked one-year recurring deposit scheme, with monthly instalment of not less than Rs 600. The draw was customers would get Rs 35 off on a gm of gold coin at the time of purchase, that is, when the RD matures. The response was good.
DEMAND GROWS
According to South Indian Bank’s Joseph, the demand for the coins is yet to wane.
“We will, therefore, not be stuck with the inventory. However, in the coming months, we may not be able to buy on credit, as the RBI has directed banks to buy the metal on consignment basis to discourage gold coin sale,” he said.
Venkataraman, Chief Executive of Karur Vysya Bank, feels the sale of gold coins by banks will come to a halt, but not immediately. “The Reserve Bank has not prohibited us from selling gold coins. But banks like ours will not like to take huge exposure. If we get good profit, we will sell. We are not get aggressive in this business though,” he said.