In an exclusive interview to The Financial Express, the chairman and managing director of the bank, Ramesh Misra revealed that the bank was waiting to sort out some of the initial teething problems, like conversion of gold jewellery deposited by customers into gold bullion and the issue of sales tax and octroi on gold deposits, before taking a final decision on the issue.

Dena Bank has already made a foray into the gold trading scheme recently and the gold trading centre at Ahmedabad was inaugurated on Friday. This makes it the sixth bank in the gold trading business. According to Misra, the bank has entered into an agreement with the Luxemburg-based Commerz Bank and Swiss bank UBS AG for this business. Under the agreement, the bank has devised two schemes for the import of gold on consignment basis from these banks.

Giving details about theschemes, the Dena Bank CMD said that gold would be supplied at a reasonable margin of 10 per cent at the time of booking. In addition, the bank would charge a competitively low commission for importing the gold. However, the bank would not be entering into the business of gold retailing and would limit itself to consignments of more than 23.32 kg of gold only.

When asked why Dena Bank had decided to enter gold trading at a time when the international gold market was in the doldrums, Misra maintained that the falling prices did not affect the bank's foray into gold trading since "we are only traders who would be supplying gold on a consignment basis and therefore will not directly involve our funds in the business."

In fact, entering the gold trading business is expected to be a profitable venture for the bank which expects to rake in profits by way of the commission it would earn for executing the transactions. Furthermore, he said the falling prices were advantageous for buyers as gold would become moreaffordable for the middle and lower middle classes and thereby increasing the market size for the commodity. He mentioned that statistics collected by the bank revealed that the hunger for gold was increasing in the Asian markets and had already doubled from 16 to 32 per cent at present.

The Dena Bank CMD also felt that though the investment value of gold may fall in future, its value for occasions such as marriages and festivals could only go up once it came within reach of the masses.

It may be mentioned that the bank has already commenced gold trading at the Chennai branch some 10 days ago and mopped up Rs 25 crore worth of business within this period days. On the anvil are plans to start similar centres in Delhi, Calcutta, Rajkot and Mumbai within the next month. Infrastructure for these centres is already in place.

Misra also disclosed that the bank has set up an ambitious business target of Rs 3,000 crore for gold trading scheme by March 2000. "This would give the bank a risk-free ensured profitof Rs 4.5 crore," he said. However, bank officials said they would be satisfied even if the bank garnered a business of Rs 2,000 crore countrywide in the first year of operation of the scheme.