So long as a jeweller uses customers’ money to meet his working capital needs, there is usually no problem. But many of them lend surplus cash to liquidity-starved businesses like real estate. Losses there take a toll on the core business, leading to default.
Experts say such incidents are an opportunity to bring in much-needed reforms. “The industry needs to set up a watchdog whose task should be to call out errant jewellers. It also needs to run large-scale awareness campaigns against malpractices,” says Somasundaram PR, managing director, India, World Gold Council. He also suggests that banks should offer gold-accumulation schemes wherein the customer is allowed to deposit small amounts of money at regular intervals. An equivalent amount of gold should be credited to her account, and whenever she wants, she should be able to take delivery of the accumulated gold.
Customers, too, need to be cautious about the entities they deal with. Avoid unregulated deposit schemes run by small jewellers. “If you go for them just because they offer higher returns, you run the risk of losing your capital,” says Ankur Kapur, managing partner, Plutus Capital. Those wishing to participate in a jewellery scheme should opt for large, reputed, national-level players as the chances of such entities absconding or defaulting are lower.
Any gold-accumulation scheme you go for should fulfil one criterion. “When you deposit money, the entity running the scheme should purchase gold, allocate it in your name, and preferably keep it in a depository. Even in the event of that entity turning insolvent, the customer’s gold then is safe with the custodian,” says Somasundaram. Finally, several products like sovereign gold bonds, gold exchange-traded funds (ETFs), and digital or e-gold have now become available where your chances of incurring losses are nil or very low. It is better to use them for accumulation rather than buy physical gold as there is no risk of theft and no purity-related issues.