Is your old-fashioned gold necklace lying idle in your locker? Here’s a way by which you can earn an interest on it in addition to converting it into gold bars of uniform fineness. Gold-deposit schemes from banks may be a good option to exchange your old-fashioned jewellery for gold bars. This can also save you the annual charges you may have to pay for your bank locker. But if you are keen on retaining your old necklace, this may not suit you.
Currently, State Bank of India (SBI) is the only bank offering gold-deposit schemes. This scheme is offered for three, four or five years. With the new Reserve Bank of India (RBI) guidelines, banks may soon offer deposit schemes for periods ranging from six months to seven years. Also, the minimum deposit may be lowered from the current 500 gm.
HOW IT WORKS
Under a gold-deposit scheme, you deposit your jewellery with the bank for a period. At the end, you can redeem your deposit in the form of gold bars of 0.999 fineness of the same weight as your deposit or cash. You will be entitled to receive a modest interest on the gold deposited.
As gold deposits are accepted only by designated branches, check for the nearest designated branch. For instance, 54 branches of SBI all over the country accept gold under the deposit scheme. As the first step, you will have to deposit the old jewellery in the designated branch. The jewellery will be weighed in your presence and a temporary receipt will be issued indicating its weight. Of course, you will be required to carry address and identify proofs and comply with the requisite procedures.
The jewellery will then be sealed in your presence and sent to the India Government Mint in Mumbai for assaying and melting the gold. In the process, gold will first be isolated from other metals such as copper and silver used in making the jewellery before being melted into gold of uniform fineness.
You will receive a gold-deposit certificate indicating the actual weight of gold within 90 days from the completion of the assaying. Interest on the gold deposit will be calculated in gold. The gold weight (in gm) will first be converted to troy ounce. The morning gold price (AM rate) in the London bullion market and the RBI reference rate on the date of maturity or interest payment will be used to calculate the interest and maturity amount.
For instance, if your net gold weight is 450 gm, the weight in troy ounce will be 14.469 (450 divided by 31.1). If the deposit pays 1 per cent annual interest, you will receive 0.14469 troy ounce of gold as interest. This will now be converted into cash. Assuming gold morning rate in London bullion market of $1600 for a troy ounce and the RBI dollar exchange rate of Rs 54, you will receive Rs 12,501 annually as interest (0.14469 multiplied by 1,600 and 54). The date of completion of assaying or 30 days from the date of deposit of gold, whichever is earlier, will be considered for interest calculation.
On maturity, you will receive gold bars equivalent to the net weight mentioned in the gold-deposit certificate. In case you opt for cash payment, the total weight will be multiplied with London morning gold rate and the RBI reference rate to arrive at the maturity value.
Should you to redeem the deposit before maturity, you may have to forego a portion of your interest. For instance, SBI charges 0.5 per cent penal interest on a three-year deposit in case you wish to withdraw from the scheme after one year. This will be adjusted against the interest receivable.
REDEEMING THE DEPOSIT
The deposit certificate needs to be sent to the nodal branch one month prior to the maturity date. You can opt to redeem the deposit either as gold or cash.
If gold prices rise, you stand to earn capital appreciation on your deposit apart from the interest paid during the term of the deposit.
However, the risk to this deposit, especially if you choose to redeem in cash, is that if gold prices in rupees decline over the tenure of your deposit, your maturity amount will be less than your original deposit
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