Tagged: Gold

ATM :: Stocks glitter more than gold in India as mutual fund flows soar

Households are putting more money into financial assets as slowing inflation reduces the value of gold
Rajhkumar K Shaaw and Santanu Chakraborty | Tue, Oct 04 2016. 07 19 PM IST | LiveMint

ATM

Mumbai: Indian investors are shifting savings into stocks like never before.

Mutual funds showed net buying of shares for a record 10th straight quarter in September, data from Bloomberg show. Households are putting more money into financial assets as slowing inflation reduces the value of gold, a traditional favourite.

Shibabrota Konar exemplifies the shift. He’s stopped buying exchange-traded funds backed by gold and now invests at least 15,000 rupees ($225) a month into stock funds. A jump in industry-wide accounts to a record 50 million at the end of August show he’s not alone.

“Gold has eroded wealth in the past three years, while stocks have taken off,” says Konar, a 43-year-old telecom engineer who lives in Mumbai. “Equity funds offer the best way to create long-term wealth. And I can invest in small amounts.”

Retail investors like Konar have been the main contributors to mutual funds’ growth since Prime Minister Narendra Modi took office in May 2014 with the biggest mandate in three decades. Assets with money managers swelled to an unprecedented 16 trillion rupees ($241 billion) in August, with stock plans making up 32% of the pie. The proportion was 20% in April 2014, data from the Association of Mutual Funds in India show.

Analysts cite several reasons for the trend:

The gush of money into funds has sent the nation’s small- and mid-cap stocks to a record, while providing companies with a growing pool of capital to tap for their initial share sales and helping the market weather events such as the U.K. vote to leave the European Union. Early signs suggest investors are looking past last week’s military offensive too. The S&P BSE Sensex has risen 1.7% in two days, recouping more than half of last week’s 2.8% tumble spurred by India’s attacks on Pakistan terrorist camps.

Rate outlook

Optimism that slowing inflation may prompt the central bank to lower borrowing costs from a five-year low is also pulling investors toward stocks, says Mirae Asset Global Investments (India) Pvt. The new central bank governor Urjit Patel led a united monetary policy panel to cut interest rates at its first review on Tuesday. The Sensex closed with a third day of gains after the policy decision.

“It’s time to back up the truck for stocks,” said Gopal Agrawal, chief investment officer at Mirae Asset, which manages $600 million. “The migration to moderate-risk equity products like mutual funds is growing at a phenomenal pace because of their relative attractiveness” over alternatives such as bank deposits, he said.

Equity funds have attracted 1.63 trillion rupees from April 2014 through August this year, according to AMFI data. That’s more than the 934 billion rupees that Deutsche Bank AG estimates funds got between January 2002 and April 2014.

The market benefits from a regular stream of money flowing from savers setting aside a fixed amount every month as part of their mutual fund investment plan. The industry takes in 35 billion rupees monthly from 11 million investors aiming to smooth out market swings through averaging, according to AMFI.

Attracting millennials

“People have begun to invest with maturity,” said Nilesh Shah, chief executive officer of Kotak Mahindra Asset Management Co. The Mumbai-based money manager, which has $9.5 billion in assets, got new inflows on Thursday when the financial markets were jolted after the nation announced it attacked terrorist camps in Pakistan.

Demographic trends are also helping, said Navneet Munot, chief investment officer at SBI Funds Management Pvt., which has $18 billion in assets.

“The bulk of our population is under 35 years of age and this generation has a much higher risk appetite,” he said. “The millennials will drive the equity boom over the next five years.”

The optimism among Indian investors contrasts with skepticism from savers elsewhere. Inflows into Japan’s stock funds fell in July to the lowest since November 2012, and stayed near that level in August, data from the Investment Trusts Association in Japan show. Almost $90 billion was pulled from US mutual and exchange-traded funds for the year through August, even as the S&P 500 Index gained almost 20% from a February low, according to data compiled by Investment Company Institute and Bloomberg.

Indian families will probably buy $300 billion of equities in the next decade, six times as much as they did in the past decade, Morgan Stanley said in a May 2015 report.

“You will be surprised with the amount of money that will come into the markets over the next three to five years,” Anand Shah, the chief investment officer at BNP Paribas Asset Management India Pvt., said in an interview in Mumbai. “The incentive to buy real estate and gold is diminishing by the day.” Bloomberg

Source: https://goo.gl/kvqA1Z

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POW :: How to fit Sovereign Gold Bonds in your financial plan

By Sunil Dhawan | ECONOMICTIMES.COM | Jul 20, 2016, 02.53 PM IST

POW

Gold in its physical form — jewellery or ornaments — has always been popular among Indians, especially women. Unlike in the past when gold was only considered a hedge against inflation and held entirely in physical form, today it finds its place even in an investor’s portfolio and largely as paper gold. Earlier as gold exchange traded funds (Gold ETFs) and now as Sovereign Gold Bonds (SGBs), paper gold offers many advantages to Indian investors now.

The Series I of SGB 2016-17 is currently open for subscription from July 18 to 22. The fourth tranche of SGB, its price has been fixed at Rs 3,119 per gram.

However, before you buy SGBs, you need to be clear about why you need to invest in gold. Is it to meet a financial goal or for pure investment purposes? If it is for the former, then most financial planners will suggest not having more than 10 per cent of the total portfolio in gold. Aniruddha Bose, Director & Business Head, FinEdge Advisory, says, “In our view, investors shouldn’t overexpose themselves to SGBs. They may form 5-10 per cent of the overall asset allocation of an investor.”

Window of opportunity
The bonds will not be available all year round. The government will keep coming out with primary issue of different tranches of SGBs for open purchase. This could typically happen every 2-3 months and the window will remain open for about a week. For investors looking to purchase SGBs between two such primary issues, the only way out is to buy earlier issues (at market value) which are listed in the secondary market.

Tax advantage
The biggest advantage of SGBs is clearly on the tax front. The 2016-17 Budget had proposed that the redemption of the bonds by an individual be exempt from the capital gains tax. Therefore, holding till maturity has its tax advantage. Redeeming in stock exchange may, however, result in capital gains or loss and one may have to pay tax accordingly. Interest on the bonds is, however, fully taxable as per the tax rate of an investor. For someone in the 10, 20, or 30 per cent tax bracket, the post-tax return comes to 2.47, 2.18 and 1.9 per cent respectively.

Cost
The initial cost of owning physical gold in the form of bars, coins is around 10 per cent and even higher for jewellery. SGBs and Gold ETFs are cost-effective as there is no entry cost in either. In the latter, the expense ratio could be around 1 per cent. Still, owning gold in paper form is cost-effective than owning physical gold.

Suitability
The returns from gold can be highly volatile, especially over the short term. Therefore, link a long term goal to your gold investments. Goals that are at least 7-8 years away are ideal as SGBs mature after 8 years. The investor could be given an option to roll over his holdings for an additional period. However, one may withdraw prematurely five years from the issue date on interest payment dates. Although one can exit in the secondary market anytime, the liquidity and price risk may exist. There may not be enough buyers for the quantity offered by you and even the market price may be low. These are the concerns when one wants to exit from an investment in a hurry. Goals such a children’s education, marriage, or your own retirement, which are eight years away or more, may be linked to investment in SGBs.

Approach
Identify a long term goal and estimate its inflated cost. Calculate the amount you need to save towards it. Similarly, find out the investment required towards other long term goals. Earmark not more than 10 per cent of the total monthly investments towards all your long term goals into SGBs. Bose says, “From a financial planning standpoint, it makes sense to take a larger exposure to more aggressive assets such as equities (as opposed to gold) for the fulfilment of long term goals.”

Treat investment in every tranche (primary issue by government) of SGBs as SIP. Alternatively, Bose suggests, “SGBs are actively traded on the exchanges, so one could always buy more of them at a later stage, from a portfolio balance standpoint.” But remember, not to invest in them when the linked-goal remains 2-3 years away. Let the existing investments in SGBs continue and make sure to redeem them at least a year before the goal to ensure the volatility in gold portfolio is minimal.

Returns
Returns in SGBs are market-linked and will depend on gold prices prevalent on maturity after eight years. “Buy SGBs keeping your overall asset allocation in mind, rather than just buying them blindly. Also, understand the risks – gold prices have already gone up sharply in the past year,” says Bose.

Rather than owning gold in physical form and not earning anything on it, SGBs mean owning gold and also earning interest on it. The government has fixed interest of 2.75 per cent per annum on the investment, with no compounding of interest. The interest shall be paid in half-yearly rests and the last one shall be payable on maturity along with the principal.

It will also be important to re-invest the half-yearly interest as the amount could be low and used up unnecessary. To put the interest amount in perspective, on an investment of Rs 1 lakh, Rs 2,750 received yearly yields Rs 22,000 after 8 years.

Conclusion
Gold ETFs provide much better liquidity than SGBs. Owning units is much easier than SGBs as it’s entirely online in the case of ETFs. The risk of owning and holding doesn’t exist in both. The only disadvantage of ETFs is that it won’t help you earn the additional interest of around 2 per cent per annum. So depending on how comfortable you are managing your investments online, choose either ETFs or SGBs.

Source : http://goo.gl/xBb4pN

ATM :: Should young earners take their parents’ advice while investing?

By Jayant Pai | Jun 20, 2016, 07.00 AM IST | Economic Times

ATM

Every parent fondly looks forward to the day when children will begin earning a steady income. However, for Indian parents, it is difficult to sever the metaphorical umbilical cord even after their child secures financial independence.

There are various reasons parents do not shy away from advising their children on money matters. One, they feel that their naive children will be parted from their money if left to their own devices. Hence, right from the first payday, they will tell you about the virtues of saving and warn against reckless spending. Two, they do not want their children to make the same mistakes they made, be it a failed investment or a loan to a friend which was never returned. Three, errors of commission committed by close family members also play a part in conditioning parents’ thought process.

Why such advice may be less effective today: The previous generation was brought up on the belief that the collective wisdom of elders was indispensable. Today’s generation is a bundle of contradictions. On the one hand, they are avowedly individualistic. On the other, they are swear by the opinions of peers in social media on every topic, be it fashion, electronics or money. Hence, parental influence is waning.

While every generation thinks it knows best when it comes to finance and investments, today’s youngsters have more educational and decision-making tools at their disposal. These may be in the form of blogs, apps, portals and even robo-advisers/algorithms. In fact, they face a glut, rather than a drought, of information. Hence, parents may often be behind the curve.

Today, wealth managers are increasingly viewing such youngsters as an economically viable segment. Hand-holding newbies, with the hope of growing with them as they uptrade, is a strategic choice.

Should children listen to their parents? In most cases, the advice received from parents is well-meaning. That may not necessarily be true in case of advice from outsiders. However, good intentions alone are not sufficient to render it suitable. While certain home truths like avoiding borrowing for consumption or maintaining a high savings rate are worth heeding, others are better ignored.

For instance, many parents dissuade their children from investing in stocks and suggest they opt for fixed deposits or gold. This may stem either from their own poor experience in the stock market or a belief that stocks are risky and another form of gambling. However, by blindly heeding such advice, youngsters may do themselves a great disservice since they forego the power of compounding that equities offer.

Similarly, parents may consider real estate as a great investment option even if they have to avail of a heavy mortgage. Children should follow such advice only after considering the repercussions of paying EMIs for long tenures of 25-30 years. Also, some parents are averse to their children purchasing insurance policies, fearing that this is an invitation to disaster. Such superstitions should not stand in the way of protecting life, limb and health. In a nutshell, when it comes to parental advice, trust them, but verify the advice.

(By Jayant Pai, CFP & Head, Marketing at PPFAS Mutual Fund)

Source : http://goo.gl/iECSwU

ATM :: Financial planning in new year: Start it now

Don’t tinker with your long-term investment plan. But it is always better to make some critical changes, based on new tax laws and instruments
Sanjay Kumar Singh | April 3, 2016 Last Updated at 22:10 IST | Business Standard

ATM

The start of a new financial year is a good time to review your financial plan and take stock of where you stand in relation to your goals. If new goals have emerged, this is the time to make fresh investments for these. While having a steady approach is a virtue here, make some adjustments in the light of developments that have occurred over the past year.

Equity funds
Large-cap funds have fared worse than mid-cap and small-cap ones over the past one year (see table). Over this period at least, the conventional wisdom that large-cap funds tend to be more resilient than mid-cap and small-cap ones in a declining market was overturned. Nilesh Shah, managing director, Kotak Mahindra AMC, offers three reasons. “For the bulk of the previous year, FIIs were sellers of large-cap stocks, whereas domestic institutional investors (DIIs) were buyers of mid- and small-caps. Large-cap stocks are also more linked to global sectors like metal and oil, whereas mid- and small-caps are linked to domestic sectors. The latter has done better than the former, leading to stronger performance by mid- and small-cap stocks. Large-cap stocks’ earning growth decelerated or remained subdued throughout last year while mid- and small-caps delivered better growth,” he says.

Despite last year’s anomalous performance, investors should continue to have the bulk of their core portfolio, 70-75 per cent, in large-cap funds for stability, and only 20-25 per cent in mid-cap and small-cap funds. Large-caps could also fare better in the near future. Says Ashish Shankar, head of investment advisory, Motilal Oswal Private Wealth Management: “IT, pharma and private banks, whose earnings have been growing, will continue to do so. Public sector banks and commodity companies, whose earnings have been bleeding, will not bleed as much. Many might even turn profitable. FII flows turned positive this month and FIIs prefer large-caps. With the US Fed saying it won’t hike interest rates aggressively, global liquidity should improve. If FII flows continue to be stable, large-caps should do better.” Valuations of large-caps are also more attractive.

Financial planning in new year: Start it now

Debt funds
Among debt funds, the category average return of income funds and dynamic bond funds was lower than that of short-term, ultra short-term and liquid funds (see table). Explains Shah: “Last year, while Reserve Bank of India (RBI) cut policy rates, market yields didn’t soften as much. The yield curve became steeper. The short end of the curve came down more than the long end, which is why shorter-term bonds did better than longer-term gilts.”

Stick to funds that invest in high-quality debt paper, in view of the worsening credit environment. Shankar suggests investing in triple ‘A’ corporate bond funds. “Today, you can build a triple ‘A’ corporate bond portfolio with an expected return of 8.5 per cent. Many of these have expense ratios of 40-50 basis points, so you can expect annual return of around eight per cent. If bond yields come down, you could end up with returns of 8.5-9 per cent. If you redeem in April 2019, you will get three indexation benefits, lowering the tax incidence considerably.” Investors who have invested in dynamic bond funds should hold on to these. “A rate cut is expected in April. Yields will drop and there may be a rally in the bond market,” says Arvind Rao, Certified Financial Planner (CFP), Arvind Rao Associates.

CHANGES YOU NEED TO MAKE
Investment

  • Fixed deposit rates from banks will be better than returns from the post office deposits in the new financial year
  • Choose your tenure first and then, do a comparison of bank fixed deposit rates before making the final choice
  • Invest in the yellow metal via gold bonds

Insurance

  • If your liabilities have increased, revise term cover upward
  • Revise health cover every three-five years to deal with medical and lifestyle inflation
  • Revise sum assured on home insurance if you have added to household assets

Tax planning

  • Conservative investors should invest in PPF at the earliest
  • Those who can take some risk should bet on ELSS funds via SIP
  • Invest Rs 50,000 in NPS

Traditional fixed income
The recent cut in small savings has jolted conservative investors. The rates on these have been linked to the average 10-year bond yield for the past three months. These will be revised every quarter now, make them more volatile. “People who want to invest in debt and want sovereign security should continue to invest in Public Provident Fund (PPF). No other instrument gives a tax-free return of 8.1 per cent with government security,” says Rao.

As for time deposits, financial planner Arnav Pandya suggests, “From April, fixed deposits of banks will give better returns than those of the post office. Decide on your investment tenure, see which bank is offering the best rate for that tenure, and invest in its deposit.” Lock into current rates fast, as even banks are expected to cut their deposit rates.

Tax-free bonds are another good option. Nabard’s recent issue carried a coupon of 7.29 per cent for 10 years and 7.64 per cent for 15 years. Beside getting tax-free income, investors stand to get the benefit of capital appreciation if interest rates are cut.

“People who have some risk appetite may also look at debt mutual funds and fixed deposits of stable companies,” adds Rao.

Gold
The sharp run-up in gold prices over three months, owing to the rise in risk aversion globally, took most people by surprise. The sudden spurt emphasises the need to stay diversified and have a 10 per cent allocation to the yellow metal in your portfolio. However, instead of using gold Exchange-traded funds (ETFs), which carry an expense ratio of 0.75-1 per cent, invest via gold bonds, which offer an annual interest rate of 2.75 per cent. The Budget made gold bonds more attractive by exempting these from capital gains tax at redemption.

Tax planning
Start investing in tax-saving instruments from the beginning of the year. “Don’t leave tax planning for the end of the year, otherwise you may have to scramble for funds,” says financial planner Ankur Kapur of ankurkapur.in. For those with the money, Pandya suggests: “Invest the entire amount you need to in PPF before the April 5. That will take care of tax planning for the year and you will also earn interest on your investment.”

Investors with a higher risk appetite could start a Systematic Investment Plan (SIP) in an Equity Linked Savings Schemes (ELSS) fund, which can give higher returns. “If you invest early in the year via an SIP, you will reap the benefit of rupee cost averaging,” says Dinesh Rohira, founder and Chief Executive Officer, 5nance.com. Pankaj Mathpal, MD, Optima Money Managers suggests linking all tax-related investments to financial goals.

If you live in your parents’ house and pay rent to them to claim House Rent Allowance benefits, which is perfectly legal, get a rent agreement prepared.

With 40 per cent of the National Pension System (NPS) corpus having been made tax-free at withdrawal in this Budget (the entire corpus was taxed earlier), this has become more attractive. “Open an NPS account if you have not done so already and enjoy the additional tax deduction of Rs 50,000,” says Anil Rego, CEO & founder, Right Horizons. In view of the low returns from annuities, into which 60 per cent of the final corpus must be compulsorily invested, don’t invest more than Rs 50,000.

Tax deduction under Section 24 is available on the interest repaid on a home loan. “Buying a property to avail of the benefit is not advisable if the family has a primary residence,” says Rego.

Insurance
While reviewing your financial plan, check if the term cover is adequate. A family’s insurance cover should be able to replace the breadwinner’s income stream. Financial planners take into account household expenses, goals like children’s education and marriage, and liabilities like home loans when deciding on a person’s insurance requirement. “If goals have changed or liabilities have increased, raise the amount of cover,” suggests Mathpal. Kapur says the premium rate is likely to be lower if you buy the term plan before your birthday.

Your health insurance cover might also need to be raised to take care of medical inflation. The same holds true for household insurance if you have reconstructed your house and the structure has become more expensive, or if you have added expensive assets. Rohira suggests buying add-on covers like accidental insurance and critical health insurance for comprehensive protection.

Source: http://goo.gl/iZ3KSx

NTH :: RBI allows pre-mature withdrawal in gold monetisation scheme

In an effort to make the Gold Monetisation Scheme more customer-friendly, the RBI today said depositors will be able to withdraw medium-term (5-7 year) and long-term government deposits (12-15 years) pre-maturely after the minimum lock-in period, though with a penalty.
By: PTI | Mumbai | January 21, 2016 11:07 PM | Financial Express

NTH

In an effort to make the Gold Monetisation Scheme more customer-friendly, the RBI today said depositors will be able to withdraw medium-term (5-7 year) and long-term government deposits (12-15 years) pre-maturely after the minimum lock-in period, though with a penalty.

The Reserve Bank today made a few amendments to its Master Direction on the Scheme.

The modifications, it said, have been made in consultation with the government to make the Scheme “more customer-friendly”.

The rate of interest on the deposits will be decided by government and notified by the RBI from time to time.

The current rate of interest as notified by the government on medium term deposit is 2.25 per cent per annum and on long term deposit is 2.50 per cent per annum.

“The depositors will be able to withdraw medium term and long term government deposits pre-maturely after the minimum lock-in period of three years in the case of medium term deposits and after five years in the case of long term deposits,” it said.

However, there will be penalty in the “form of lower rate of interest for premature withdrawals” depending upon the actual period for which the deposit has run.

Further in the case of large tenders of gold, the RBI said the metal can be deposited directly with refiners wherever they have the assaying capacity.

“This will reduce the time lag between the time the raw gold is deposited and it starts bearing interest,” RBI said.

RBI also clarified that government will pay the participating banks a total commission of 2.5 per cent (1.5 per cent handling charges and 1 per cent commission) in the first year.

The Scheme will be reviewed regularly based on feedback so as to address any implementation issue and to make it more customer friendly.

Last week, Economic Affairs Secretary Shaktikanta Das had said under the Gold Monetisation Scheme more than 500 kg of gold has already mobilised and the Scheme was picking up.

Under the Gold Monetisation Scheme (GMS), 2015, banks will collect gold for up to 15 years to auction them off or lend to jewellers from time to time.

In November last year, Prime Minister Narendra Modi had launched a scheme to channelise gold worth over Rs 52 lakh crore lying with households into the banking system and floated paper bonds to curb its imports that have made India the largest buyer of gold in the world.

India imports a staggering 1,000 tonnes of gold every year, draining out foreign exchange and putting pressure on the fiscal deficit. An estimated 20,000 tonnes of gold worth over Rs 52 lakh crore is lying with households and temples.

The RBI further said the principal and interest on Short Term Bank Deposit (STBD) would be denominated in gold.

In the case of Medium and Long Term Government Deposit (MLTGD), the principal will be denominated in gold.

“However, the interest on MLTGD shall be calculated in Indian Rupees with reference to the value of gold at the time of the deposit,” the RBI said in its amended circular.

Resident Indians (Individuals, HUFs, Proprietorship & Partnership firms, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies) can make deposits under the Gold Monetisation Scheme.

Joint deposits of two or more eligible depositors are also allowed under the scheme and the deposit in such case would be credited to the joint deposit account opened in the name of such depositors.

The existing rules regarding joint operation of bank deposit accounts including nominations would apply to these gold deposits.

All deposits under the scheme would be made at the Collection and Purity Testing Centre (CPTC).

“Provided that at their discretion, banks may accept the deposit of gold at the designated branches, especially from the larger depositors.

“….banks may, at their discretion, also allow the depositors to deposit their gold directly with the refiners that have facilities to carry out final assaying and to issue the deposit receipts of the standard gold of 995 fineness to the depositor,” the RBI circular added.

The government will notify the list of BIS certified CPTC / refiners under the Scheme and would be communicated to the banks through Indian Banks’ Association (IBA).

Source: http://goo.gl/gNXEZy

ATM :: Why gold purchases should not be part of financial planning?

Abhijit Gulanikar | Tuesday, 17 November 2015 – 8:30am IST | Agency: dna | From the print edition
The track record of gold, before adjusting for transaction costs, for giving returns is fair.

ATM

For Adwait and his family Diwali is festive time to be enjoyed with family and friends. It is also time to buy gold. Along with Diwali, he buys gold every year during Akshaya Tritiya. He buys gold during all important life events like birth of his daughter, wife’s 30th birthday. This gold has in most cases bought as ornaments for his wife, daughter or himself. He recons that large portion (around 30-35%) of his savings is in form of gold. Adwait is not alone and many Indians have similar habits making India the largest purchaser of gold.

This mindset of investing in gold is received wisdom we have learnt from our forefathers and has been a long tradition in India. But this tradition is from era when financial instruments were not well developed. Today investments that are safer than gold will provide returns equal to or higher than the return on gold. By safer I mean both physical security and price security (capital guarantee). Most financial instruments are in electronic form or physical receipts that can be encashed only after due authentication by the owner (signature/password-OTP). Gold is, on the other hand, subject to theft and robbery. One needs to protect it buy hiring safe deposits lockers or other similar arrangements. Gold is generally safe from point of price security but it is also subject to market fluctuations like other commodities. We have had period where the price of gold has not recovered to previous peak for 4-5 years. Like price of gold is currently around Rs 26,000 for 10 gram, lower than Rs 31,000 we had three years ago.

The track record of gold, before adjusting for transaction costs, for giving returns is fair. Analysis of gold prices over last 40 years reveals that average return for long-term holding (10 years or more) is slightly lower than 10%, whereas inflation during the same period averages around 8%. Gold thus does provide positive real returns, i.e returns higher than the rate of inflation.

Above analysis is purely theoretical based exchange traded prices of gold. In real life the return will be significantly lower on account of transactions costs. Adwait has paid making charges every time he has purchased the ornaments. Making charges vary considerably from jeweller to jeweller but are substantially higher than zero transaction charge for making a bank fixed deposits or buying national saving certificate. Adwait has remade old ornaments from time to time and has paid a deduction for old ornament, and at the same time making charges for the new ornament. Adjusting for these costs and cost of safe keeping the return on gold would not be higher than rate of inflation.

Adwait should go ahead with his tradition of purchase of gold during Diwali as it has a huge sentimental value. Display of ornaments during social occassions also has a huge social value. However it would be judicious to reduce the amount of gold that he purchases. For important life events like his daughters 10th birthday, instead of buying a gold chain, he could invest the same amount in a long-term fixed deposit or mutual fund. Gold purchases should be done purely for sentimental/social reasons and not as part of his financial planning.

The writer is chief officer-business strategy, SBI Life Insurance

Source : http://goo.gl/w3wKkv

NTH :: Banks free to fix interest rates: RBI

The minimum deposit at any one time shall be raw gold — bars, coins, jewellery excluding stones and other metals — equivalent to 30 grams of gold of 995 fineness.
By: ENS Economic Bureau | Mumbai | Published:October 23, 2015 12:58 am | Indian Express

NTH

The Reserve Bank of India (RBI) on Thursday issued directions to all scheduled commercial banks on the implementation of the Gold Monetisation Scheme which will replace the Gold Deposit Scheme of 1999.

According to the guidelines banks will be allowed to fix their own interest rates on gold deposits.

The deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless the depositors prematurely withdraw them, according to a press release issued by the RBI. The central bank said that resident Indians that include individuals, HUFs (Hindu Undivided Families), trusts including mutual funds/exchange traded funds registered under Sebi (mutual fund) regulations and companies can make deposits under the scheme.

The minimum deposit at any one time shall be raw gold — bars, coins, jewellery excluding stones and other metals — equivalent to 30 grams of gold of 995 fineness.

“There is no maximum limit for deposit under the scheme. The gold will be accepted at the Collection and Purity Testing Centres (CPTC) certified by Bureau of Indian Standards (BIS) and notified by the Central government under the scheme. The deposit certificates will be issued by banks in equivalence of 995 fineness of gold,” it said.

The RBI notification in this regard comes ahead of the formal launch of the scheme by Prime Minister Narendra Modi on November 5. The gold deposit scheme is aimed at mobilising a part of an estimated 20,000 tonnes of idle precious metal with households and institutions.

As per the guidelines, banks will be free to set interest rate on such deposit, and principal and interest of the deposit will be denominated in gold. “Redemption of principal and interest at maturity will, at the option of the depositor be either in Indian rupee equivalent of the deposited gold and accrued interest based on the price of gold prevailing at the time of redemption, or in gold. The option in this regard shall be made in writing by the depositor at the time of making the deposit and shall be irrevocable,” it said.

The interest will be credited in the deposit accounts on the respective due dates and will be withdrawable periodically or at maturity as per the terms of the deposit, it said. “The designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit (STBD) as well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes. While the former will be accepted by banks on their own account, the latter will be on behalf of Government of India,” it said.

The short term bank deposits will attract applicable cash reserve ratio (CRR) and statutory liquidity ratio (SLR), it said.

Source : http://goo.gl/kT3v54