Many ways to participate in wealth creation via gold
Dec 23 2011 , Chennai
Financing options: Titan’s mass-market jewellery brand, GoldPlus, has systematic investment plans (SIPs) for two gold schemes in addition to an equated monthly instalment (EMI) financing scheme.
Palani Kumar, general manager, jewellery division, Titan Industries GoldPlus, says these schemes account for 15 per cent of the Rs 550 crore total sales of the company. The schemes also are recording 20 per cent year-on-year increase in the number of customers opting for the schemes, he adds.
Under a gold accumulation plan for 12 months, one can invest a fixed amount of money with the company for 11 months and get one instalment as bonus from the company. On the completion of the scheme, one can buy jewellery worth the accumulated amount as per the day’s gold rate.
Several jewellers, including Titan’s premium jewellery brand, Tanishq, have the scheme. Tanishq has a 12-month fixed monthly instalment plan and an 18-month flexible plan.
For the fixed instalment scheme, Prince Jewellery credits physical gold into the customer’s account each month on the date of payment. This reduces the risk of gold price escalating by the end of the scheme tenure. The bonus awarded by the jeweller varies as per the terms of investment.
Diverse routes: A newer scheme is much more flexible in terms of monthly instalments. “If it is a Rs 1,000 monthly instalment, one can invest any additional amount anytime during the tenure and get the corresponding grammage of gold credited to his account,” says Princeson Jose, managing director of Prince Jewellery. For Prince Jewellery, which started the monthly instalment plan 10 years ago, the schemes account for 25 per cent of total sales.
More than 70 per cent of customers of GoldPlus investment plans are women. “Customers with fixed income generally prefer fixed instalment plans, whereas, the other scheme is popular with the business class,” says Kumar. GoldPlus also has a tie- up with India Post for remittance of instalments for the fixed investment plan.
Bank tie-ups: Most banks now have tie-ups with jewellers to provide gold finance, which can be repaid as EMIs.
“In such financing schemes, the customer pays 15 to 20 per cent of the money upfront and the rest is paid by the bank. The customer can then pay the loan back to the bank as EMI,” says Jose.
Bank of India’s Star Mahila Gold Loan Scheme offers loans for jewellery purchase for both working and non-working women at an interest rate of 13.75 per cent. Indian Bank, Corporation Bank and Canara Bank have specially designed schemes for purchase of gold ornaments. The lenders offer these loans primarily to employed women aged between 18 and 58 years. Canara Bank has a scheme called Can Mahila, where women between18-55 years of age can avail loans for personal expenses, including purchase of gold ornaments. The interest rate varies between 10-10.75 per cent and there is a service charge. However, the loan requires a co-obligation from husbands, sons or parents.
In addition to jewellery, one can also buy gold coins and bars from the bank on an EMI scheme. Corporation Bank has a scheme called Corp Mitra Gold, which is specifically designed for purchase of gold coins and bars from the bank’s gold outlets. Only Life Insurance Corporation of India (LIC) agents are eligible for this loan, which has a limit of
Rs 1,00,000 and an interest rate of 13.25 per cent.
NBFCs: Non-banking financial companies (NBFCs) too have similar schemes. Muthoot Fincorp’s Swarnavarsham is an investment scheme to purchase gold in small quantities by paying a nominal margin. The remaining amount could be paid monthly or daily as equated instalments.
Muthoot Finance has tied up with GoldPlus to provide customers loans for buying gold jewellery. However, in this scheme, the purchased jewellery will remain as security with the NBFC till the instalments are paid off. Such loans help plan purchases for a wedding well ahead of time and avoid bank locker charges.