Gold saving schemes to offer lower returns
Gold saving schemes to offer lower returns
According to Pune-headquartered PN Gadgil Jewellers' gold rush investment scheme if you invest Rs 1,000 for 36 months (Rs 36,000), then the jeweller pays you Rs 7,000. That is, return of 19.44%. With a lower tenure scheme, you end up making 12.50% for two years and 8.33% for one year. For 24-month tenure investor puts in Rs 24,000 and jeweller pays Rs 3,000; for 12-month tenure investor puts Rs 12,000 and jeweller pays Rs 1,000.
But next time you think of putting money in jewellers' gold saving scheme you will earn a lower return. Reason: These schemes have been brought under the definition of 'deposits' which fall under the purview of the Companies Act. Under the new rules, the effective return on the deposits cannot be more than 12% and the total amount of deposits has to be within 25% of the company's (other than banks and non-banking finance companies) networth.
That would mean a loss of 6-7% for investors. Saving schemes by all organised jewellers like Tanishq, PC Jewellers, PN Gadgil Jewellers, Tribhuvands Bhimji will now be deposits as these are registered as companies, says Ashok Minawala, former chairman of All India Gems and Jewellery Federation. Under the earlier regime, money put in these schemes were seen as advances for future purchase. Minawala adds that the tenure for these schemes will have to be restricted to one year. Currently, the scheme tenure ranges from one to three years.
The new rule ensures safety for investors as jewellers will be able to take only those many deposits that they can repay. However, jewellery market has a large number of unorganised players who run similar schemes. These jewellers may not come under the new rule as all of them may not be registered as a company. Hence, not all investors can be protected.
"Many jewellers used the money from these schemes for their business. That made the government believe that these schemes are unsafe for investors. In a bad market, there were good chances that such jewellers may not have been able to repay. Hence, the government has been thinking of regulating these schemes," said an industry expert.
The principal of the investing in the scheme will remain the same even under the new rules, says Tanishq's vice president - marketing, Sandeep Kulhali. He said Tanishq will launch the new scheme as soon as they finish wrapping up the older one, the deadline for which is August 31. "We have informed all our customers to close their accounts. They can choose between taking a cheque, buying coin(s) or jewellery," Kulhali adds.
The existing customers will earn a maximum of 75% of the jeweller's instalment on a pro-rata basis depending on the number of instalments paid, if the customer chooses to buy jewellery. They would earn a maximum of 50% of the jeweller's instalment on a pro-rata basis depending on the number of instalments paid, if the customer chooses to take a cheque or buy coin(s). Only those who have paid all the 11 instalments will get full return from Tanishq. These schemes work like bank recurring deposits.
Given the scale of the scheme will also be lesser on the back of the new rules, jewellers may have to turn down customers if they cross the 25% mark or ask customers to enrol for smaller instalments.
The other problem with these schemes was no grievance redressal mechanism. Which remains even now. Says Sajid Mohamed, partner at PDS and Associates, "Despite these safeguards if a jeweller defaults on payments there is no way for the customer to ensure he gets his money back. Just that the penalties for this is harsher under the new law, that is, the firm's director can be jailed which was not the case earlier." Grievance redressal remains the same as that of company fixed deposits. At best, you can put pressure on the company through various legal channels.
Financial planner advocate bank fixed deposits (low returns but safer) or gold exchange-traded funds over these schemes (can be redeemed for physical gold).
Business Standard
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
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According to Pune-headquartered PN Gadgil Jewellers' gold rush investment scheme if you invest Rs 1,000 for 36 months (Rs 36,000), then the jeweller pays you Rs 7,000. That is, return of 19.44%. With a lower tenure scheme, you end up making 12.50% for two years and 8.33% for one year. For 24-month tenure investor puts in Rs 24,000 and jeweller pays Rs 3,000; for 12-month tenure investor puts Rs 12,000 and jeweller pays Rs 1,000.
But next time you think of putting money in jewellers' gold saving scheme you will earn a lower return. Reason: These schemes have been brought under the definition of 'deposits' which fall under the purview of the Companies Act. Under the new rules, the effective return on the deposits cannot be more than 12% and the total amount of deposits has to be within 25% of the company's (other than banks and non-banking finance companies) networth.
That would mean a loss of 6-7% for investors. Saving schemes by all organised jewellers like Tanishq, PC Jewellers, PN Gadgil Jewellers, Tribhuvands Bhimji will now be deposits as these are registered as companies, says Ashok Minawala, former chairman of All India Gems and Jewellery Federation. Under the earlier regime, money put in these schemes were seen as advances for future purchase. Minawala adds that the tenure for these schemes will have to be restricted to one year. Currently, the scheme tenure ranges from one to three years.
The new rule ensures safety for investors as jewellers will be able to take only those many deposits that they can repay. However, jewellery market has a large number of unorganised players who run similar schemes. These jewellers may not come under the new rule as all of them may not be registered as a company. Hence, not all investors can be protected.
"Many jewellers used the money from these schemes for their business. That made the government believe that these schemes are unsafe for investors. In a bad market, there were good chances that such jewellers may not have been able to repay. Hence, the government has been thinking of regulating these schemes," said an industry expert.
The principal of the investing in the scheme will remain the same even under the new rules, says Tanishq's vice president - marketing, Sandeep Kulhali. He said Tanishq will launch the new scheme as soon as they finish wrapping up the older one, the deadline for which is August 31. "We have informed all our customers to close their accounts. They can choose between taking a cheque, buying coin(s) or jewellery," Kulhali adds.
The existing customers will earn a maximum of 75% of the jeweller's instalment on a pro-rata basis depending on the number of instalments paid, if the customer chooses to buy jewellery. They would earn a maximum of 50% of the jeweller's instalment on a pro-rata basis depending on the number of instalments paid, if the customer chooses to take a cheque or buy coin(s). Only those who have paid all the 11 instalments will get full return from Tanishq. These schemes work like bank recurring deposits.
Given the scale of the scheme will also be lesser on the back of the new rules, jewellers may have to turn down customers if they cross the 25% mark or ask customers to enrol for smaller instalments.
The other problem with these schemes was no grievance redressal mechanism. Which remains even now. Says Sajid Mohamed, partner at PDS and Associates, "Despite these safeguards if a jeweller defaults on payments there is no way for the customer to ensure he gets his money back. Just that the penalties for this is harsher under the new law, that is, the firm's director can be jailed which was not the case earlier." Grievance redressal remains the same as that of company fixed deposits. At best, you can put pressure on the company through various legal channels.
Financial planner advocate bank fixed deposits (low returns but safer) or gold exchange-traded funds over these schemes (can be redeemed for physical gold).
Business Standard
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
--
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To unsubscribe from this group and stop receiving emails from it, send an email to Productupdatesforamc+unsubscribe@googlegroups.com.
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