India is one of the largest gold consumers in the world. From jewellery to bullion, the countrymen love to invest in the metal. After all, gold helps people stay safe from inflationary pressures, market volatility, and political turmoil wreaking havoc in the financial markets. In this matrix, gold-saving schemes are a weapon that allows even small investors to stay in the fray.
What is a Gold Saving Scheme?
Gold saving schemes are financial instruments that primarily operate as systematic investment plans or SIPs, where the investor deposits a small sum usually between INR 500 to INR 10000 monthly. However, the investors do not earn profits. Instead, they get discounts from the jeweller and interest from banks. It’s commonly seen that the dealer/jeweller gives a 75% to 90% discount on the final instalment amount.
Several prominent jewellers in the market offer gold-saving schemes in India. Some of the significant league names include Tanishq, Malabar, Kalyan and PNG Jewellers.
Some banks such as ICICI Bank, Axis Bank, PNB and HDFC Bank have also introduced gold-saving schemes.
Additionally, in 2015, gold schemes were announced in the budget. Idle-lying gold was encouraged to be lent to banks for interest. Jewellers in turn could borrow from the banks.
The three major gold schemes that emerged in India were the gold monetisation scheme, the gold coin and bullion scheme, and the sovereign gold bond scheme.
How Do Indian Banks’ Gold Schemes Work?
Since gold schemes related to banks work differently than those of jewellers, we have defined features of the former below:
- Once the gold purity is approved by an authorised body.
- The collection centres then melt the gold in refineries (with the customer’s permission).
- A certificate of deposit is issued.
- The certificate is used to get a gold savings account.
- Gold is stored with the refineries at a price that is pre-fixed by them and the bank.
Note that long-term deposit redemption of bank gold schemes can only be done in cash while short-term redemption can be done in cash and gold.
How do jewellers’ gold saving schemes work in India
Say a customer likes a gold necklace at a jeweller’s and enrols in its gold saving scheme for 12 months. The monthly instalment is INR 2,000, and the final instalment is 80% discounted.
Then, by the end of the 12th month, the customer has invested INR 22,400. He can buy gold for the original INR 24,000.
It’s worth noting that while some schemes allow money to be withdrawn prematurely, there is usually a penalty implemented discount-wise.
Importance of Gold Saving Schemes in India
Not everyone can buy gold in one go. It’s an expensive metal, and these schemes act as piggy banks for a specific consumer purpose: to buy gold either in jewellery or bullion form. Since a smaller monthly amount is deposited instead of a single lump sum value, the schemes are popular among salaried people.
Thus, these make the gold purchases not just simpler but also more affordable.
List of Gold Saving Schemes Offered by Jewellers and Banks in India
- GRT Gold Scheme
- Tanishq Golden Scheme
- PNG Jewellers Gold Scheme
- Kalyan Jewellers Gold Scheme
- Bhima Jewellery Gold Scheme
- Malabar Gold Schemes
- Prince Jewellery Gold Scheme
List of Gold Investment Schemes Offered by Banks and the Government of India
- Gold Monetization Scheme
- RBI Sovereign Gold Bond Scheme
- PNB Gold Schemes
- Andhra Bank Gold Schemes
- ICICI Gold Schemes
- HDFC Gold Scheme
- Axis Bank Gold Schemes
- SBI Gold Scheme
Factors To Consider Before Investing in Gold Saving Schemes
Choosing the scheme that fits your bill is essential to extract the best possible value. Some of the factors that must be considered are:
- Minimum monthly contribution and tenure: It’s essential to know your investment goal and what your minimum monthly contribution and tenure should and could be to reach your goal.
- Interest rate/discount: Sometimes, outstanding players, offer lower discounts. See if lower discounts are worth the credibility of the jeweller/banker or if an average player offers similar results and better interest rates/discounts.
- Credibility of jeweller/bank: Not all jewellers are trustworthy, and you should not keep all schemes on the same playing field. Do your due diligence before choosing your scheme.
- Penalty for premature withdrawal: If you plan for contingencies, choose a scheme with a moderate penalty.
Bottom Line
Gold-saving schemes are popular in India, allowing small investors to invest in gold affordably. Investors deposit a small sum monthly and receive discounts from jewellers and interest from banks.
Some jewellers offer a 75% to 90% discount on the final instalment amount. Prominent jewellers in India that offer gold-saving schemes are Tanishq, Malabar, Kalyan, and PNG Jewelers. Banks such as ICICI, Axis, PNB, and HDFC have also developed gold-saving schemes.
When choosing a gold-saving scheme, consider factors such as minimum monthly contribution, interest rate/discount, credibility, and penalty for pre-mature withdrawal.
Frequently Asked Questions (FAQs)
What is a monthly gold scheme?
Monthly gold saving schemes are similar to SIPs, where an investor deposits a small sum monthly. These schemes offer discounts from jewellers and interest from banks.
Who should invest in gold-saving schemes?
People who want to invest in gold in piecemeal form should look at these schemes.
Do these schemes have tax benefits?
Yes, these schemes are usually exempt from tax. But, not all schemes are exempt from tax. You must read the fine print before making decisions.
Which is the best gold-saving scheme in India?
It’s a personal and, therefore, subjective topic. What you like, how much you want to invest, what sort of discount you are looking at, and the credibility of the jeweller usually play a role in decision-making.
Which gold scheme is best for long-term investment?
It’s again a subjective decision- it varies from person to person. Some people like collecting jewellery and therefore might prefer jewellers’ schemes while those who like to earn interest on their gold might want to opt for bank schemes.
Are gold schemes beneficial or risky?
While having advantages of affordability and discounts/interest, gold savings schemes have their drawbacks. Schemes from jewellers limit buying choices, and investments can only be used to buy jewellery. It’s therefore important to buy a scheme from a credible jeweller.
Missing a payment might to forfeiture of accrued benefits. There might also be hidden charges. Therefore, caution is advised.
The buyer can pay in instalments, which is a significant benefit of this scheme.
