If you have been depositing money with your neighbourhood jeweller every month for purchase of gold in future, you may soon receive a call from the jeweller informing you about the closure of the scheme. Gold savings schemes, which have been in the reckoning for sometime now considering the astounding returns offered by gold over the past decade, are facing closure after the Companies Act came into force from 1 April 2014.
Under the new Companies Act, these schemes fall under the category of public deposit schemes and are not allowed to offer more than 12.5% annual returns (the maximum rate an NBFC is permitted to offer on its deposits). The Act also restricts jewellers from raising fund through various deposit schemes over 25% of their net worth.
Therefore, jewellers offering more than the threshold limit of 12.5% returns will have to withdraw the scheme and redeem the funds thus collected. As per industry information, a large number of companies offer 12-19% returns on schemes with 1- and 3-year tenure. A large number of jewellers have already stopped their deposit schemes leaving investors with the option to withdraw their money or purchase jewellery. Broadly, there were two types of gold savings schemes offered by jewellers.
In the first option, you have to deposit a fixed amount every month for a chosen tenor, while in the second option, you have to deposit an amount every month and the jeweller will buy gold worth that amount monthly. As per estimates, gold savings schemes totalled Rs 20,000 crore under various schemes by jewellers across the country. Companies like Titan, PC jewellers offered gold savings schemes to investors by collecting monthly instalments from them.
