SBI gold deposit scheme - need for a relook

By Our Staff Reporter

COIMBATORE, MARCH 4. The Gold Deposit Scheme launched by State Bank of India has not made much headway because of the apathy of the Government and lack of enthusiasm on the part of individuals. Though the scheme has been floated with the avowed intention of mobilising the privately held gold to curtail import of the yellow metal, it has not paid off yet.

For instance, the Coimbatore main branch of SBI has collected so far 23 kg of gold from 22 customers, but given the magnitude of gold and gold jewellery sales being effected in this region, the volume is quite insignificant. The lacklustre performance on this score can be attributed to the unimpressive provisions made in the scheme.

The promoter of the scheme, SBI, boasts that the primary objective is to bring the privately held idle gold into circulation to reduce the country's import and to provide some income for the owners with the assurance that gold can be reclaimed at any time. To rope in even small depositors, the minimum amount of gold to be deposited has been maintained at 200 gm.

Other than individuals, depositors could also be Hindu Undivided Families, trusts and companies. What does not attract the prospective depositors is that if they submit gold ornaments, these would be melted and the purity of gold would be assessed. Based on the quality of the ingots thus obtained, the value would be worked out.

This process exposes the lacunae in the scheme: as depositors generally attach sentimental value to their ornaments which would have been in their possession for generations together. Moreover, once the ornaments are melted, the exact purity would be known, and it would even reveal the lapses on the part of the manufacturers.

Above all, there is a lock-in period of three to seven years, as the depositors prefer, with nominal interest rate of 3 to 4 per cent. The depositors hardly find the interest rate appealing, and moreover, the liquidity character of ornaments would be totally lost. Though the scheme promises sufficient liquidity to the depositors through rupee loan (against the deposits), obviously the interest rate would be high, as per RBI norms.

Those depositors who are hardpressed for money would have to wait at least for one year to be eligible for premature encashment. The only saving grace is that the certificates issued in the denominations of 100 gm and 1000 gm are ``transferable by endorsement and delivery.''

What is quite disheartening to SBI is that the temples have not responded favourably, or at least the temple administration is rule-bound as not to pledge the gold or gold ornaments in its custody at its own will.

The scheme is mainly aimed at bringing out the gold ornaments in the possession of large number of temples, but in reality it has belied the expectations.

The temples could not take a decision about depositing gold ornaments on their own, and they have to get the approval from the Government concerned.

But the Governments are playing safe, lest they should attract adverse publicity, and face fusillade of criticism from the opposition parties. However, the bullion sale undertaken by SBI is doing very well.

This shows that while people are eager to acquire gold, they think twice before disposing it of, in whatever form. The widely prevalent notion is unless there is a willing participation of women in this scheme, it is bound to fail. Perhaps, the bank has to have a relook at the scheme, if at all it intends to make the scheme attractive.

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