BankBazaar.com CEO Adhil Shetty explains ways one can buy, hold and sell gold at National Spot Exchange

Anita had invested in the e-gold scheme by National Spot Exchange (NSEL) to save on her wedding jewellery instead of purchasing physical gold. She was told by a broker that e-gold units could be converted into physical form as gold coins or bars which she could then exchange for jewellery at any jewellery shop.

Over the years, there have been many options such as gold ETFs, e-gold and other schemes that allow you to invest in gold units virtually or on paper and encash your investment in cash or physical gold at the time of maturity.

What is e-gold?

The e-series scheme was launched by NSEL under which a person can invest in precious metals such as platinum, gold and silver and other metals such as zinc, lead and nickel in dematerialised form. Investors are required to open beneficiary accounts to hold the commodity units in dematerialised format, electronically. The beneficiary account is popularly known as the demat account and has to be opened in the investor?s name with the recognised depository participants.

On maturity, the investor has the option to convert the dematerialised gold into physical form for withdrawal.

How to go about it?

At the time of maturity, you must surrender the e-gold units you have in your demat account to the Depository Participant (DP). Submit the delivery instruction slip (DIS) to DP along with the surrender request form (SRF). These forms can be downloaded from NSEL website.

DP will then transfer e-gold units to NSEL as per DIS directives along with the attested signatures and TRF of the investor. The dealers authorised by NSEL will then hand over the gold coins or bars to the investor at specified centres against the units of gold invested. The investor has to mention the centre where they want to take the delivery from in DIS.

Currently, NSEL allows physical delivery of gold in a limited number of cities only from where the investor can collect the physical gold from centres, including Mumbai, Delhi, Kolkata, Indore, Kanpur, Jaipur, Hyderabad, Cochin, Chennai and Bangalore.

The procedure

To receive e-gold in physical form, an investor needs to:

* Submit the complete DIS to DP

*DP transfers e-gold units to NSEL account as per instructions

* DP attests the investor?s signature on the transfer request form and hands over an acknowledgement for DIS.

* The investor submits DIS and SRF to NSEL with instructions pertaining to the centre for collecting the physical gold

* Pay dues to NSEL towards conversion charges once NSEL communicates the total due via email.

* Payment must be made by cheque or DD as per the amount due in favour of ?National Spot Exchange Limited?

Collection from the vault

NSEL stores gold units of 99.5% purity in physical form in a vault that is fully insured. The delivery of gold is made as per the request at the specified centres. The investor can take the delivery from the vault after 7 days and within 15 days from the submission of the request. In case, the investor does not make the collection within 15 days, he is liable to pay storage charges for the entire month. The investor must produce DIS, SRF and identity proof at the time of collection at the centre.

Charges?applicable

Once NSEL receives DIS and SRF, it will compute the total gains and then deduct the applicable charges for conversion. It will, than email you the amount due (the email id provided on DIS) and the investor will be asked to deposit a cheque in favour of ?National Spot Exchange Limited? for the said amount with the vault. If the amount payable is more than R50,000, the payment amount has to be made by demand draft.

The charges applicable for the conversion into physical format include:

* 1% VAT applicable at the time of conversion

* Local taxes as applicable

* Conversion charges of:

(a) R200 for 8 gram and 10 gram

(b) R100 for 100 gram

(c) None for 1 Kg

(c) Packing charges of coin/bar

(e) Delivery charges

Denominations of gold & how to store it safe

The units of physical gold may be taken in multiples of:

* 1 gram

* 8 gram

* 10 gram

* 100 gram

* 1 kg

In a combination of all multiples

The investor may exchange the gold for jewellery at any jeweller in the country as a certificate of purity will be issued while taking the gold. You may store gold in a bank locker if you want to hold it in the same form you receive it or sell it in the market at current rates. E-gold is a great investment if you do not want to bear the risk of storing physical gold.