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Last Updated Monday April 23 2018 02:51 PM IST

Should I invest in gold deposit schemes?

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Should I invest in gold deposit schemes? We Indians are enamored of gold. The yellow metal is an essential part of our weddings.

If you had visited a jewelry shop, the salesman there would have surely tried enticing you to join their gold deposit scheme (well, this is the case with most jewelers).

You might have also been canvassed over the phone for the same.

But, how convinced are you? That too with frequent changes in rules forcing jewelers to tweak their offers. Some like Bhima Jewellers have even suspended their schemes.

We Indians are enamored of gold. The yellow metal is an essential part of our weddings.

However, buying gold takes a heavy toll on the pocket. Gold deposit schemes can help you here, splitting the expense over a period of time.

It allows you to save in small installments and use the accumulated fund to buy jewelry. Jewelers make the schemes more attractive by offering generous discounts.

But, how beneficial are these really for you?

As in any financial investment, study the scheme documents carefully — don’t leave out the fine print. Credibility of the jeweler should be a critical factor while deciding whether or not to join a scheme. Jewelers have set their own standards. So, take time to understand the conditions, such as what would happen if you missed an installment, or if you wanted to pull out midway.

A key feature of the deposit program used to be the bonus — usually equal to a month’s installment after 11 months — that the jewelers added to the accumulated amount. But because of restrictions imposed by the Reserve Bank on such offers, the benefit is now given as discounts on making charge.

Here are details of the schemes offered by some top jewelers:

Kalyan Jewellers:

The tenure of the scheme is 11 months. You can deposit any amount, but if you missed it once, 60% of the first installment will be forfeited — 50% in case you are buying diamond jewelry with the accumulated money.

When you redeem the scheme after 11 months, Kalyan will not charge you for up to 20% making charge.

That means, if you are depositing Rs 5,000 a month, the amount will become Rs 55,000 after 11 months. You will also get an up to 20% discount (Rs 11,000) on making change. In effect, you could buy jewelry with a market value of Rs 66,000 (accumulated deposit + discount on making charge, if all that you are buying have 20% making charge). You will be offered an up to 75% discount on making charge beyond 20%.

Chungath Jewellery

Installments start at Rs 500 a month. Schemes are available for up to two years and the deposit can be made through online banking or cards as well. Every time you make a payment, gold equal to the amount on that day’s price will be added to your account. You benefit at the end of the term if the gold price has increased. On rare occasions, the opposite can happen, too.

If installments are missed, the tenure will increase accordingly.

The jeweler offers 5-20% discount on making charge when the scheme is redeemed — this is equal to 7-8% interest on the deposit. Discount is given only on the amount that was deposited without any default. Making charge on jewelry like Singapore models and antique items is quite high. You will have to pay the extra making charge to buy these.

Malabar Gold

Deposits start at Rs 500 and the tenure is 11 months. Benefits vary based on factors such as the tenure of the scheme, the amount deposited, the kind of jewelry purchased and the making charge. On an average, the discount on making charge is 5-6%.

Chemmanur Jewellers

Deposits can be any amount from as low as Rs 250 a month. The tenure is 19 months, but deposits in the last nine months should not exceed the average for the initial 10. Once the scheme is matured, you will get an up to 20% discount on making charge. On items where the making charge is more than 20%, you will have to pay 50% of the extra amount. Consumers who want to buy gold for marriages can deposit old gold under this scheme and exchange those later for new to insulate themselves from price increases.

Read more: Business | Moody's ratings upgrade after 13 years extremely encouraging: Jaitley

The opinions expressed here do not reflect those of Malayala Manorama. Legal action under the IT Act will be taken against those making derogatory and obscene statements.

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