Khyati Dharamsi

Mumbai: Buying gold from a bank this Akshaya Tritiya (May 7)? Well, you’d better shop around, or you’ll end up paying more. Reason: banks have different selling prices for gold coins of the same denomination.

On May 2, when DNA checked with various sources, prices for a 50-gm coin varied as much as Rs7,000 — enough to buy another 5-6gm of gold (see table). Akshaya Tritiya is considered an auspicious occasion to buy gold for the family.

For about three years now, banks have been selling gold coins at select branches.

“We started selling gold coins about a year back from the last Akshaya Tritiya. Response has been good throughout the year in spite of gold prices being high,” says Sonu Bhasin, senior vice-president, wealth management group, at Axis Bank. Banks sell these coins even to non-account holders.

However, if you are not careful, you might end up getting gypped.

“The selling price of coins offered by banks is based on international gold prices at the time of their purchase. If the global market price of gold was low when the bank purchased it, then a bank can keep the price low and hope to get more customers or sell the gold at a higher price to gain more profit,” a source told DNA.

This means checking prices at various branches before buying gold is a good idea. Broadly speaking, public sector banks offer gold coins at much better rates than private banks. But if one compares the prices offered by banks with respect to the market price of gold, you will find that the bank coin comes at a premium of 6-15%, depending on the bank you buy it from.Why this premium for a gold coin?

“Yes, there is a marginal premium compared to the open market. But there is value for the premium,” says KVS Manian, group head - retail liabilities & branch banking, Kotak Mahindra Bank.

The value bank's value lies in the "purity of gold" it offers and the tamper-proof pack. It comes with an 'assay' certificate certifying purity.

"Packaging has a cost. Also, there is assurance of the gold. There is a premium for the assurance. When gold is bought for investment, it is always preferable to have an assurance on the purity of the product. Banks also have your trustworthiness," Manian adds.

But is a premium justified for coins in the same tamper-proof pack and the same purity when a certificate is available elsewhere at lower cost? "All Popley coins are certified and come with a tamper-proof package," says Rajeev Popley, director of Popley Group, which sells gold jewellery and coins. "Banks sell these coins at a price far higher than the market price taking advantage of their goodwill," he adds.

Also, Popley says, "The variety of coins available with us is far larger. Banks may have a limited 5-6 variants of coins. But at Popley stores, you have about 70 different models in terms of designs and denominations so that customers have a choice. A customer also gets a more competitive price."

Also the most important point is that while banks sell you gold coins, they do not buy it back.

"The regulator does not allow us to buy it back," says Bhasin of Axis Bank. So when you try to sell these coins, you will have to approach a jeweller.

And jeweller will pay you the market price of gold for that day, wiping off the premium you paid for buying it from the bank.

Source : DNA