In an effort to boost gold sales in India, the local arm of the World Gold Council (WGC), has engaged the country’s second largest private sector lender, HDFC Bank, to provide personal loans to gold buyers.
The service is likely to be launched in the country within a few days.
WGC is a gold body funded by global mining companies to promote gold sales across the world.
“HDFC has taken the initiative to provide personal loans at almost 16 per cent interest. The security is arranged in such a way that the bank will keep the gold on behalf of the customers till they pay the entire cost in trenches beginning three months from the date of purchase. This is a unique service to be launched first time in India,” said Ajay Mitra, MD, India Sub-continent, WGC.
Initially, HDFC Bank had agreed to provide loans for up to 50 gm of pure gold. But, the bank may consider loans for large investors also.
However, if other banks want to join the bandwagon, they would be welcome, Mitra said on the sidelines of a meetings of investment consultants here on Tuesday. The meeting was organised by WGC in association with the Financial Planning Standards Board, India with the theme “Gold as an asset class for investment.”
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When asked about the probability of success of this service, Mitra said, “Such services would surely attract investors towards gold with potential of savings.”
Meanwhile, WGC has embarked upon extensive promotional activities in rural areas of the country, where about 70 per cent of India’s gold consumption takes place.
The council has organised “Lucky Laxmi” — retail sales of gold jewellery items across the country. It has also tied up with Tata’s jewellery arm which has been engaged in retail jewellery sales since 2005-06.
“WGC mainly focuses on semi-urban gold jewellery consumers in Tier-III and Tier-IV cities where general households have no alternate options but to invest in gold. For rural customers, we are conducting education programme to attract small and retail customers towards gold,” Mitra added.
Amid fears of global financial downturn, India’s gold imports especially in the third quarter of the current calendar year are estimated to remain robust.
Although, data compilation is currently in the final stage, preliminary hints indicate robust growth in gold investment demand especially in coins and bars sectors in India during the third quarter, Mitra added.
Talking about volatility in gold prices, thereby affecting consumer demand, Marcus S A Grubb, managing director, Investment Research & Marketing of the WGC said that the volatility would continue in the near term on supply constraint.
Many banks have decided to hold gold back in their portfolio looking at the supply tightness, he added.
He emphasised that the yellow metal had offered 12-14 per cent of sustained profits over the last several years even in current financial market crisis and hence, can be considered undoubtedly as the main and not the alternate investment option.