Florine Roche
Daijiworld Media Network - Mangalore

Mangalore, Jul 19: It looks like the middle class and lower middle class Indians who have been dependent on monthly jewelry gold schemes to possess some gold will be a disillusioned lot. This is because of the new laws laid down under the new Companies Act coming into force recently laying down certain conditions for collection of deposits by jewelry companies. Many big players like Tanishq, P C Jewelers, Reliance gold, Gitanjali Group etc., have discontinued these schemes while other jewelers are modifying their schemes according to the new rules and regulations. This monthly installment saving schemes had become very popular and jewelers were able to amass thousands of crores in advance from the public. The government decided to introduce some stricter regulations to protect investor interest as it thought such huge amount could pose risks.

From time immemorial India’s love affair with the yellow metal ‘gold’ is well known. The desire to acquire and possess gold is a common phenomenon in the country and naturally Jeweler Gold Saving Schemes that enabled middle and lower middle class people to acquire gold by paying money in installments in advance, are quite popular all over the country. The popularity of these schemes proved to be a bonanza for jeweler companies in the form access capital. Needless to say these schemes had caught the fancy of Indian public especially the women, in a big way. That Tanishq the flagship company of Tata was able to collect Rs. 1300 crores till March this year through its Golden Harvest and Swarna Nidhi schemes, clearly demonstrate the popularity of these schemes.

Now these schemes have come under the scanner of the Securities and Exchange Board of India (SEBI). As per the new law which has come into effect from April this year ‘deposits’ taken by jewelers, which were previously not included under the Companies Rules of 1975, are now brought under the purview of collective investment schemes. Therefore, jewelers are now constrained to discontinue their long term schemes which fall under the purview of the new regulations. Now there is a kind of uncertainty among the people who subscribe to these schemes as well as among jewelers who have promoted these schemes. Leading player in this segment Tanishq has been contacting the customers to allay their fears and offering them a reasonable option to close the gold schemes.

Vandana Nayak, a self-employed business woman says “these schemes offered an opportunity for women to save money every month so that they could buy some gold at the end of the stipulated period. With gold prices hovering around 25,000 per sovereign it is impossible for an average middle class family to buy gold in normal circumstances. That is where this yearly and longer version of the schemes came in handy for many families. With gold holding a position of prestige and security we cannot wish away buying gold whatever may be the cost. This saving scheme option suits us perfectly and with leading and trusted companies offering attractive schemes, I opted for it”.

Many popular jewellery brands have discontinued all their schemes temporarily and are personally in touch with their customers explaining the reasons for the discontinuing the scheme. For example, Surekha, a government employee, who subscribes to Tanishq’s Golden Harvest Scheme, got a call from the Mangalore franchise office of Tanishq recently stating she should close her scheme by the latest of August this year following the new regulations introduced by the government. Tanishq has also issues advertisements in newspapers to this effect saying it welcomes the new regulations at the conceptual level and will work with the rest of the industry to request the Ministry of Company Affairs some refinements to the rules to protect public interest that would simultaneously help the industry.

The new regulations clearly state that companies which raise money from the public for tenure more than 365 days fall under the new rule. Therefore, some jewelers are continuing only the 11 1 scheme which does not come under the ambit of the new regulations and are discontinuing the longer version of the installment schemes that attract provisions of the new law.

New regulations are also applicable only to jewelers registered as private limited companies and hence small jewelers are not affected by the new regulations. But then customers have become smarter and put their money only on reputed companies and do not go for smaller companies.

Reshma Baliga, a homemaker who has subscribed to “Abharan” monthly installment schemes points out “I go only for trusted brands like Abharan to invest my money. I trust this company as I believe the company has the capacity to pay me back my hard-earned savings in whatever form, if the need arises”. She is happy that Abharan is continuing its 11 1 yearly scheme as the new rules apply only to schemes of more than 365 days of tenure.

Srinivas Bhandary, Manager of Mangalore branch of Abharan agreed that the monthly gold scheme was mutually beneficial both to the owners as well as to the customers. “It was the best means of sales promotion for us and it has worked wonders for us at the same time benefiting the customers. The advantage with our schemes is that whenever the customers pay their installment money the gold value of that day is credited to the customer’s account. So the customer gets his due depending on the prevailing market prices. These schemes have been very beneficial for many who would otherwise find it impossible to buy gold considering that gold prices have skyrocketed”. Reshma Baliga concurs stating “these schemes are very beneficial to middle class and lower middle class families. With gold prices going beyond the reach of common people many of us cannot afford to buy gold paying a lump sum amount. I am happy that Abharan is continuing with its one year scheme so that I am able to save something at the end of the year”.

However, as most jeweler schemes are running into 24 to 36 months and come under the definition of “deposits” as prescribed in the Companies Act, they will have to shelve their long term schemes. Kallyan Jewellers, which boasts of one of the biggest showrooms in Mangalore, also said that it is in touch with its customers requesting them to close their schemes that go beyond one year. Srinivas Bhandary of Abharan says there is ambiguity with regard to some regulations and the company is in touch with the authorities to get a clear understanding of the new rules. At the same time he adds that the company will try to promote its brand through other schemes don’t come under the radar of new regulations. “These schemes were quite beneficial to the middle class as it was convenient and too much of a burden on them. At the end of the year they could accumulate some amount with which they could buy some jewelry. We hope we will be able to able to device new schemes once we get a clear picture of the new regulations”, Bhandary points out.

With the scenario changing there is a possibility of some people option for the schemes floated by small time jewelers who are not registered under the Companies Act. But their trustworthiness is much to be desired and people will have to move with utmost prudence. The very purpose of introducing the new laws is to safeguard public money. If people don’t exercise discretion the very purpose of the new laws will be defeated. In the meantime let us hope the jewelers are able to come out with schemes that are mutually beneficial.