As the festive season sets in, jewellers across the country are stocking up gold and silver. Indians are known for buying gold and Diwali, which is round the corner, is one of the favourite occasions to buy the yellow metal. However, gold prices have surged in the past few weeks, because of a global economic uncertainty. Gold price closed at Rs27,731 per 10g at the Multi Commodity Exchange (MCX) on Monday.
Given such high prices, you can consider buying physical gold in small chunks. Here are three ways to buy physical gold through equated monthly instalments (EMIs).
Easy Gold Scheme
Under this scheme, you can buy gold bars, supplied by Religare Bullion Ltd, a subsidiary of Religare Enterprises Ltd. Distributed by Bajaj Capital Ltd, these 24-carat bars are of 99.9% purity and certified by MMTC Ltd, a bullion trader. You can apply for the product online at www.bajajcapital.com and a representative will get in touch with you for the paperwork.
Also See | Penalty charges (Graphic)
Options: There are two time period options under this scheme: 12 months and 24 months. The minimum order quantity for the 12-month option is 10g and for the 24-month option is 20g, and further in multiples of 10g. The denominations of gold bars available are are 10g, 50g and 100g.
How it works: You need to pay a fixed upfront amount of around 15% of the current gold price and the remaining amount will be converted into EMIs for 11 or 23 months depending upon the option you choose. So, lets say you go for option one and buy a 10g gold bar priced Rs27,546. You need to make a downpayment of around Rs4,132. The remaining amount will be converted into 11 EMIs of Rs2,128 each. Says Harish Sabharwal, chief operating officer, Bajaj Capital Ltd, “Under this scheme the customer will be able to buy gold through easy monthly instalments via ECS (electronic clearing service). The good part is that the customer will not face price volatility as the price of the gold will be freezed.”
Once you are through with all instalments, you can collect the gold bar from any of the 29 Religare Bullion centres across India. Part delivery option is available with the 24-month plan, but the minimum order quantity should be 30g. After paying 12 instalments, you can take delivery of 40% of the quantity of gold. You will have to pay a charge of 2% of the value of gold.
Keep in mind: The good part about the scheme is that it is very convenient as all you need to do is apply online. Paying is easy as you can set monthly instalments. Also, you will not face price volatility since the price is locked at the prevailing rate when buying the gold.
However, if gold prices fall, you will be trapped at a higher price. Moreover, if a cheque issued by you bounces, you need to pay a penalty of Rs300 for the first instance and Rs500 on subsequent bounced cheques.
Also, the price of 10g bar as on 8 September under this scheme stood at Rs32,350, while the gold price for 10g of gold on the MCX was Rs27,546 on the same day. Currently, there is no buy-back option, means if you want to sell the gold the firm won’t buy it back. Also there is a penalty levied in case you make late payments (see table).
This scheme is offered by Muthoot Fincorp Ltd. Under this scheme as well, you can buy 99.9% pure gold through EMIs.
Options: Here too, you will have to pay a margin money and repay the balance amount in EMIs if you choose the monthly scheme. However, under this scheme you can also choose the daily repayment scheme.
You can buy gold coins in denominations of 1g, 2g, 4g, 8g, 20g and 100g. The downpayment or margin money is a minimum of 5% and maximum of 20% for amount up to Rs25,000 and 30% for amounts greater than Rs25,000. If you choose the daily scheme the margin money is only 5% up to 8g. However, if you want to buy more that 8g, you have to pay a margin money of maximum 20%. You will be able to get the gold once you complete paying all the EMIs. Under the daily plan, you can pay on a daily basis, instead of monthly basis. George Muthoot, director, Muthoot Fincorp, Muthoot Pappachan Group, says, “The price of gold may change several times in a day, and since we offer real times rates, customers can benefit from it.”
How it works: You will have to make a downpayment and pay the balance amount as EMIs. But you will have to bear an interest on the balance amount. “Let’s say you buy gold worth Rs2,000, and make a downpayment of Rs300. You will have to pay Rs1,700 plus the applicable interest amount as an EMI. The rate of interest charged will depend upon the tenor, ” Muthoot says. For instance, the rate under the monthly scheme for 12 months is 13.50%, for 24 months it’s 13.45%, and for 36 months it’s 13.80%.
Keep in mind: Under this scheme, you can pay through cash as well. On delay of payment there is a penalty of 2% of the EMI amount for the first month and 3% from the second month onwards. In case you are unable to pay the EMIs, you can request to foreclose the scheme. The company will purchase the gold at the current price less the applicable charges. The company also provides a free locker facility to store the gold.
Gold Harvest Scheme
Tanishq India is currently running this scheme, wherein you can buy gold jewellery from Tanishq on instalments.
Options: Currently, there are two schemes known as the 11+ 1 months and the 18 months plan. The minimum instalment value is Rs500 and you can increase it to any amount in the multiples of Rs500.
The 11+1 months scheme: Under this scheme, you invest a fixed amount every month with Tanishq for 11 months. The 12th month instalment is paid by Tanishq. So, if you invest Rs5,000 each month for 11 months, Tanishq will match the 12th month EMI of Rs5,000 and you will be able to buy gold jewellery worth Rs60,000. A back of the envelope calculation will tell you it is an 11% discount.
Sandeep Kulhalli, vice-president, Tanishq, says, “This is a value-based jewellery buying programme.”
The 18 months option: Under this scheme, you have to invest for 18 months. However, the amount here can be flexible. This means you can choose how much you want to invest each month. Say, you started with Rs3,000 per month. Now you can increase it to Rs8,000 one month and the reduce it to Rs500 the month after that. Since you don’t need to fix the EMI amount, this option offers the flexibility of payments. However, under this scheme you do not get any free instalment. You can choose the online or offline option to enroll and make payments towards the scheme. You can use selected banks debit and credit cards to make the payments.
“Once you’ve completed the duration, you can buy the jewellery at the prevailing price for that day. It’s better to redeem once the duration is over, but there are people who redeem after two three months as well since they want to buy gold on a particular day or for a specific occasion,” Kulhalli says.
You can buy anything from a wide range of pure 22-carat jewellery, 18-carat diamond jewellery to coloured stones. However, keep in mind that you can’t buy gold, silver coins and solitaires under this scheme and you cannot get cash on redemption. Tanshiq has an exchange programme wherein you can exchange the jewellery if you want later on.
Things to keep in mind: Keep in mind that branded jewellery is usually expensive than regular jewellery.
Mint Money take
Gold prices are stretched right now. To buy gold now or not will purely depend on your need for the metal.
However, if you are looking to buy physical gold on EMI, any of these options might work for you. Also, if you choose among these three products then first compare the cost and the scheme features and ease of payment.
There are other options to buy gold in small units as well—gold exchange-traded funds and e-gold.
Graphic by Uttam Sharma/Mint