Buying gold: Win a trip to Dubai or get a new Skoda

This festive season you can a win a trip to Dubai or get a brand new Skoda with the jewellery you buy. Jewellers are offering a host of freebies to lure customers as growth has halved this festive season due to volatility in gold and the liquidity crisis that has hit the economy. Talking to ET, RK Sharma, chief operating officer of Delhi-based PC Jeweller said, "In 2012, we had witnessed a growth of 20-25% over 2011. But this year we are expecting a growth of 10-15%. The extreme volatility in the yellow metal is affecting the market sentiment. Despite this scenario we are expecting good sales from semi-urban and tier-2 cities."

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Gold loan companies urge RBI for level playing field

Fearing rapid loss of business to banks, gold loan companies have urged the Reserve Bank of India (RBI) to provide a level playing field. In a recent meeting with the RBI officials, gold loan companies emphasised that the latest move by the banking sector regulator favours banks lending against gold jewellery at the cost of private sector players in this business. The RBI’s move is set to cap branch expansion of the gold loan companies and prove an obstacle in bringing out mounting idle gold in the country. Confirming the meeting, an official with one of the leading gold loan companies said, “We urge to provide us a level playing field as the recent RBI guidelines favour banks.” “Gold loan non banking finance companies (NBFCs) are doing a socially useful function and that provides a strong rationale for careful regulation of the activities” is what the KUB Rao’s final report. The report carried a detailed analysis with the final recommendations, which not only clarified the negative air against the gold loan NBFCs but most importantly clear a roadmap on how to shape the sector for long term growth.

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Avoid the gold loan route

Mumbai resident Akhila Swamy (name changed on request) needs Rs 3.50 lakh. She had planned to raise the funds against her gold holding, which she rarely uses. Once earlier when she had a similar requirement she had borrowed against the same. But, some friends have advised Swamy against it given that the Reserve Bank of India (RBI) has been tightening lending norms against gold jewellery.

“I have gold coins also which I had pledged last time. And I was able to secure as much as 80% of the value of gold. But, this time when I enquired over the phone two companies told me that I would get only up to 60% of the value of gold sans gold coins. If I leave out coins I may not be able to raise as much as I want,” Swamy complains.In a latest notification the RBI has reiterated that the loan-to-value (LTV) ratio for loans against jewellery should be 60%. The apex bank has also asked for the value of gold jewellery to be standardised.

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Half-hearted steps will not help halt rupee slide

Economists, market analysts, planners and administrators have their own theories, explanations and remedies for the rupee crisis. But one only has to recall the famous words of Sherlock Holmes: “It is simple, my dear Watson!”

The continuous fall of the rupee, despite brave statements and declarations by the country’s central bank and the administrators, is mainly due to the demand-supply gap. It is somewhat akin to what happens to onions and tomatoes seasonally. Historically, the currency markets in India lacked depth and volumes. In addition, currently, the market sentiment, which impacts the market at all times, has weakened beyond a point. There is no denying the fact that economic fundamentals and policies would determine the value of a country’s currency. But this is valid only in the long run.

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Exclusive: India might buy gold from citizens to ease rupee crisis

A pilot project will be launched soon, a source familiar with the Reserve Bank of India (RBI) plans told Reuters. India has the world's third-largest current account deficit, which is approaching nearly $90 billion, driven in a large part by appetite for gold imports in the world's biggest consumer of the metal.

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 imported 860 tonnes of gold in 2012. "We will start a pilot project among some banks where we will allow them to buy back gold from individual households," the source, an official familiar with the central bank's gold policymaking, said. "This will start soon, we have discussed (it) with banks."

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Rupee breaches 63, hits new low

Falling over 2.6 per cent from its previous close, the rupee breached the 63-mark hitting a historic low of 63.30 against the dollar. The rupee closed at life-time low 63.13 per dollar on account of heavy capital outflows from the domestic equity market.

Despite the Reserve Bank of India’s measures to restrict capital outflows, the rupee fell 165 paise on Monday as heavy outflows weighed on the currency. The domestic unit opened at 62.30 from Friday’s close of 61.66 per dollar. The unit moved in the range of 62.21 and 63.30 against the American currency. This is the biggest intra-day low in a decade.

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Gold continues to glitter for customers, banks

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.

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RBI not to ban banks from selling gold coins

The Reserve Bank of India (RBI) does not want to prohibit banks from selling gold coins so as to encourage genuine investment, but is not in favour of speculative buying or aggressive marketing by banks, D Subbarao, Governor has said.

On Monday, the RBI had said that banks will not be permitted to give loans against gold exchange-traded funds (ETFs) and gold mutual funds.

“If people want to buy gold for savings, the route should be available for them but for genuine purpose. But if the loan to value ratio is not restrained, there is a possible risk,” he said.

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Indian lenders take Rs 4000 crore hit on Mumbai based jeweller Winsome

Indian banks have grudgingly forked out well over 4,000 crore to international bullion banks on behalf of Winsome, a Mumbai-based jeweller, but are unsure whether the money can ever be salvaged.

What makes their job particularly difficult is the absence of adequate securities against exposures to Winsome. This is because last year, the banks had released corporate guarantees and mortgages that the Winsome group had given to obtain credit facilities from the local lenders.

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RBI cautions banks on gold sales

Finding gold coins at your neighbourhood bank branch may become tougher. The Reserve Bank of India (RBI) has suggested that banks should not aggressively sell gold products at their branches. This is the latest attempt by the central bank to stem runaway gold imports, one of the key reasons behind the widening trade and current account deficits. 

Sources told TOI that the issue was raised during the customary post-monetary policy meetingwith bankers on Friday. Separately, RBI is issuing fresh guidelines for banks that provide incentives to executives for crossselling of gold and other financial products, which are seen to be the key reason behind recent allegations of money laundering and other irregularities. 

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RBI to probe banks' practices in gold product sales

The Reserve Bank of India is looking into sale of gold coins and gold-related investment products by about 30 banks to find out whether their employees are mis-selling such products to customers.

The RBI move follows complaints of customers being induced by bank employees and non-staff members within bank premises for purchase of gold coins, gold-related investment products and other wealth management schemes.

The central bank is studying the business practices of 30 banks to ascertain any mis-selling of these products and to find whether such products are being sold as a pre-condition for offering the regular banking services, sources said.

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Gold prices up 1% to Rs 26,069 on global cues, spot demand

Taking positive cues from the global market and rising physical demand in spot markets at prevailing levels, gold continued its recovery, rising by nearly one per cent to Rs 26,069 per 10 gm in futures trade today.Besides, covering-up by speculators who had created huge short positions, also helped gold to trade higher at futures trade.

At the Multi Commodity Exchange, the most-active delivery in June contracts traded Rs 265, or 0.99 per cent, higher at Rs 26,069 per 10 gm in a turnover of 5,506 lots. Similarly, the metal for delivery in far-month August spurted by Rs 241, or 0.95 per cent to Rs 26,475 per 10 gm, clocking a business volume of 155 lots. At the spot markets, gold traded Rs 250 higher at Rs 26,600 per 10 gm in the national capital.
At the spot markets, gold reclaimed Rs 27,000 level with prices rising by a whopping Rs 500 to trade at Rs 27,100 per 10 gm.

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Banks may be hit by gold crash, says India Ratings

The impact of ongoing steep fall in gold prices on the jewellery industry will be mixed and will depend on gold sourcing norms of individual retailers, but the crash may hit banks, India Ratings said today. "Jewellers who lease a major portion of the gold will positively benefit from the correction, while banks may be affected negatively," India Ratings Director (Corporate Ratings) Deep N Mukherjee said in a report. The rating firm believes retailers like Gitanjali Gems, Tribhovandas Bhimji Zaveri, PC Jewellers and Titan, which usually lease gold, will be relatively unaffected by the sharp fall in bullion prices. However, in such cases, the nominated banks (by RBI) will have to bear the commodity risk and thus incur losses, Mukherjee said.

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Banks step up vigil on gold loans

Banks have started reviewing the margin requirement for gold loans following the sharp fall in the prices of the yellow metal. Gold prices fell to its lowest level in 20 months today on sustained selling by stockists against restricted buying. After dropping Rs 3,160 in the last three sessions, gold fell further by Rs 90 to Rs 26,350 per 10 grams, its lowest level since August 17, 2011. Typically, most public sector banks maintain a loan-to-value ratio of 70%, while it is higher for some of the private sector banks. Top executives of public sector banks said they had already reduced the amount they used to lend per gram of pure gold.

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Gold price fall to hit banks, NBFCs: India Ratings

Rating agency India Ratings today said falling gold prices, if sustained, could significantly impair the asset quality of the gold loan portfolios of non-banking finance companies (NBFCs) and banks. It said the impact of the sharp fall in recent weeks could be absorbed by high profitability but more  softening of domestic prices would make a larger part of the portfolio vulnerable. Companies with significant exposure to gold loans could, thus, be impacted severely.

Muthoot Finance and Manappuram Finance are two large NBFCs which give loans against gold. Some South India-based lenders such as Indian Overseas Bank and Indian Bank also have a significant gold loan portfolio. In such debt, the loan to value (LTV) ratios are high, due to intense competition to gain market share, said India Ratings.

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When Budget says don’t buy gold, why are banks selling yellow metal?

A customer at the Karnataka Banking Ombudsman’s Town Hall meet, on Tuesday, expressed concern over banks setting targets for selling gold to customers. The main purpose of the Town Hall meeting was to listen to the grievances of the public with regard to instances of deficiencies and problems while dealing with the banks. Sudhir Ghate, one of the participants, said the Union Finance Minister’s Budget speech urges people to refrain from buying additional gold. “I request that banks should not sell gold. And there should not be targets for banks to sell gold,” he said.

POLICY LEVEL DECISION

Replying to this, K.C. Chakrabarty, Deputy Governor of Reserve Bank of India, said that if a bank is selling gold, RBI will not come in its way. Banning a particular activity is a policy level decision.

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ICICI Bank to sell 11-kg pledged gold to recover loans

NEW DELHI: Country's largest private sector lender ICICI Bank will auction this month goldjewellery weighing over 11 kg, pledged by more than 150 borrowers, who have defaulted on their payments. The auction would be conducted by the bank branches in Uttar Pradesh, Bihar andUttarakhand from April 18-22 for gold jewellery deposited by about over 150 customers as collateral for their loans, the bank said in a public notice last week. While neither the exact value of the gold ornaments being auctioned nor the outstanding loans could be ascertained, an equivalent amount of gold would be worth over Rs 3 crore at current prices. 

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Corporation Bank plans to test purity of gold pledged with ‘caratometers’

To ensure purity of gold pledged with it by borrowers, Mangalore-headquartered Corporation Bank is experimenting with caratometers at some of its branches. With its gold loan portfolio jumping by almost 70 per cent jump in FY13 to about Rs 4,000 crore, the public sector bank is testing viability of the caratometer as a risk-mitigation tool, aimed at breaking the borrower-assayer (usually a local jeweller) nexus. The caratometer, which is a scientific and non-destructive method of testing the purity of the precious metal, could be used for a confirmatory test (after the assayer gives his report on the quality of gold), thereby ensuring the purity of gold pledged with the bank by borrowers, said a senior official.

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Banks raise cautionary bar on gold loan firms, but see no liquidity risks

With an existing problem regarding a rising level of loans turning non-productive, banks are becoming cautious on exposure to gold finance companies. They have sought data from these companies on loss absorption capacity in case of a fall in gold prices and higher defaults.

The trigger is the recent warning from Manappuram Finance, the country’s first listed gold financing company, about pressure on profitability and higher than expected defaults as a fallout of the fall in gold prices. The latter have declined by almost 10 per cent from a peak of Rs 32,500 for 10g in November 2012 to Rs 29,515 at present. A senior official with Corporation Bank said they wanted a better assessment and were seeking information from gold companies for an impact analysis of the correction in prices and the loss absorption. Another executive with a Mumbai-based bank said they were doing the same thing. “We are (being) more cautious in giving further credit to them (gold financiers),” he said.

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Bank term deposits, gold buying eating into small savings pie

MUMBAI, MARCH 25:  

The Postal Department’s small savings scheme seems to be facing the ripple effect of competitive interest rates on bank term deposits and retail consumers’ penchant to buy gold.

The accretion to the small savings scheme, comprising deposits, savings certificates and Public Provident Fund (PPF), slowed a shade to Rs 16,086 crore in December 2012, against Rs 16,297 crore in the year-ago period.

According to Reserve Bank of India data, as at December-end 2012, the outstanding amount in small savings schemes was lower by Rs 8,782 crore at Rs 6,01,961 crore compared with Rs 6,10,743 crore a year ago.

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