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Have you invested in Gold Savings Schemes?

Gold, as we all know, is a favourite among the Indians. As such, it is no wonder that Gold Savings schemes too have become quite popular. 

Typically, under such schemes, you pay a fixed amount to the jeweller every month for say 11 months, and as an incentive the jeweller pays the 12th instalment on your behalf -- or some such variation of the same.

However, as I had cautioned in my blog [5 things to know about Gold-on-instalment Schemes] many months ago, it was advisable to avoid such schemes. The reasons, briefly, were as under:

- The so-called incentive of the last installment being paid by the jeweller was most probably just on paper 
- In certain schemes there was the risk of gold becoming expensive in the interim 
- The only option was to buy gold "jewellery" (bars and coins not permitted) which comes with heavy making charges
- Moreover you were constrained to buy jewellery from the particular jeweller only

Hence, from operational point of view, Gold ETF or even buying gold bars/coins were a far more profitable option than the gold savings schemes.

Now even SEBI has decided to probe such schemes and their legality is being questioned... better late than after some scam happens!

Who is supposed to regulate the jewellers and other such entities as they neither come under the purview of RBI or SEBI or any other regulatory authority as far as collecting deposits is concerned?

Do these schemes qualify as Collective Investment Scheme, wherein (a) an entity collects money from many investors to be managed on their behalf and (b) the amount collected exceeds Rs.100 crores?

What if the jeweller closes shop and runs away with the investors' money?

Accordingly, given that the prevalent Gold Savings schemes are neither operationally nor legally on a firm footing, it would be in our best interest to ignore them.

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