Most people in India consider gold as their asset and a safe means of savings. People buy gold and keep it in a bank locker or home safe and do not touch it for years. The price of gold may increase with time, but it does not provide any regular income to the owner. In many families, gold ornaments are preserved for generations and their value is realized only when they are sold or mortgaged.
In such a situation, gold leasing has emerged as a new option. In this, you lend your gold to a jeweler or institution for some time and in return earn returns (interest) on it. The special thing is that the ownership rights of gold remain with you only.
How does gold leasing work?
In gold leasing, you give your gold to jewelers, who need gold to make jewellery. In return they usually give you returns ranging from 2% to 7% annually. This return is not received in cash but in the form of grams of gold. That is, if you have given 100 grams of gold on lease, then after the fixed period, you can get the original 100 grams of gold and some additional grams of gold on top of that as interest. Some banks also provide such facility under the Gold Monetization Scheme of RBI. Many fintech platforms also provide this service, where your gold is given to the jewelers and you get interest.
Can digital gold also be given on lease?
According to some experts, there may be a facility to lease digital gold also. However, legal experts say that digital gold is not yet fully regulated in India. Because of this, investors do not get the same protection as the stock market and digital gold leasing is not yet widely available or considered safe.
Is insurance available on gold leasing?
Gold leasing does not get government insurance protection like bank deposits. Some private platforms claim to have their own level of insurance, but this is not applicable everywhere. According to experts, neither RBI nor SEBI has direct control over private digital gold leasing. Therefore, if the platform or jeweler defaults, the investor will not get government protection.
Benefits of gold leasing
- You can earn money on gold without selling it.
- Instead of lying idle in the locker, gold starts giving income.
- Interest is also available in the form of gold.
- If gold prices increase in future, there may be additional benefits.
- Jewelers do not need to take expensive loans.
Risks of Gold Leasing
1. Risk of default
If the jeweler or the borrowing party does not return the gold, the investor may suffer a loss.
2. Market Risk
Interest is paid in grams of gold. If the price of gold falls, the rupee value of your investment may reduce.
3. Liquidity risk
Your gold remains locked during the lease period. You cannot sell it immediately when needed.
4. Platform Risk
If the gold leasing company gets into financial trouble or closes down, there may be a delay or legal trouble in getting the gold back.
What things should be kept in mind before investing?
Experts say that before investing in gold leasing, make sure that the ownership of the gold remains in your name, there is adequate insurance on the gold, independent audit is done, the platform and the jeweler are reliable and verified. Apart from this, all the legal conditions should be present in writing. Gold leasing definitely provides an opportunity to earn money, but it also has risks. Therefore, complete information and caution is necessary before investing.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
