Many bank customers are withdrawing their deposits in order to buy gold which is now available at an attractive price.
Many scheduled banks offer 9 per cent interest on deposits and allow premature withdrawals by imposing 1 per cent penalty. The facility of taking deposits before maturity period prompted many customers to withdraw the amount so that they can buy gold at cheaper rate.
While 22 carat gold was priced at Rs.31,000 per 10 gm till a few months ago, it is now available at Rs.25,500.
A few customers are taking fresh gold loans against their ornaments so that they could utilise the amount to purchase yellow metal in the market. Many scheduled banks are giving gold loans at 9 to 12 per cent interest rate. The interest rate is only 7.5 per cent if customers show the proof of agricultural property. “We surrendered our deposits since we will get more returns on gold within no time. I asked my friends also do the same to utilise the golden opportunity,” said Y.Adinarayana, a retired engineer. With the sudden fall in price in the commodities market, the banks are also very cautious about giving fresh gold loans. Earlier, they used to give up to Rs.2,200 per gram but it was reduced to Rs.1,800.
State Bank of India and other banks got directives from their head office to reduce the loan amount against gold in the changed scenario. Compared to private finance companies, scheduled banks are in a safe position since they offered only 65 per cent amount on the value of gold. The private companies offered up to 90 per cent amount over the value of gold. “The public sector banks adhered to the rules and regulations. The loan amount value is still below the current market prices of the gold. So, the customers who took gold loans will come back to take them. But it is very difficult for private financial companies,’ said a senior bank official.