SBI Slashes Gold Deposit Rate To 1.5%

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Mumbai, April 2: : In line with international trends, the State Bank of India (SBI) has slashed interest rate on gold deposits to 1.5 per cent from 3.5 to 4 per cent offered earlier. SBI, the only bank offering the scheme, is also finding it difficult to deploy the gold accepted in the form of deposits in the changing trade scenario.

“While international gold deposit rates were at 1.5 per cent for a few years now, SBI was asked to offer 3.5 to 4 per cent in India. We are unable to offer such a high rate of interest and have brought down the rate to 1.5 per cent recently in line with the international rate. However, this is made applicable only to new deposits,” a source from SBI confirmed to FE.

The gold deposit scheme had been a losing business for SBI, not only on the interest front. The basic problem is difficulty in the continuous deployment of gold deposits. Gold exporters do not take gold from SBI as they can get it cheaper under the Gold Replenishment Scheme of the Centre.

“Even domestic jewellers are used to dealing in huge amount of gold on a cash-basis, except for some bulk consumers, like Titan Industries. So, most of the gold deposits with the bank could not be lent. The present level of gold deposit stock with SBI is at 6.5 tonne,” a source added.

On the other hand, depositors are never happy with the assaying practice adopted, which leads to a change in the shape of the jewellery before the process. This is mostly because such gold is found to be of inferior quality than the marked one.

The gold deposit scheme was announced a few years back with the objective of bringing idle gold into circulation, and reducing dependence on imports. Though the intentions were good, higher linkage with the global markets is making the scheme irrelevant to the times.