K A Babu, the head of retail business at Federal Bank, headquartered in Kerala, talks about Indians’ attachment to gold:
Why do Indians tend to keep gold at home and why are they such large consumers of gold?
An Indian consumer’s preference for gold emanates primarily from two factors – the first being Indian cultural beliefs, where gold is considered to be a symbol of purity, prosperity and good fortune, and the second being the propensity to save, as gold is viewed as a safe investment avenue. In India, holding and wearing gold ornaments has always been considered very auspicious. Gold is viewed as the most efficient store of value and hence widely recognised as a tool for intergenerational wealth transfer. Gold jewellery can also serve as a liquid asset, which also increases the demand for gold among Indians.
What are other solutions that could make gold more productive for the economy, or ways to reduce consumption?
It might be practically impossible to reduce Indians’ consumption of gold considering the cultural and religious factors attached to it. However, the fact that a major portion of individuals’ savings are channelled into physical assets such as gold indicates that there is vast scope for the banking system to take advantage of these opportunities. There is great scope for expanding financial inclusion by extending gold jewellery loans. If banks continue to increase their gold jewellery loans portfolios, the reliance of economically weaker sections of the society on money lenders and pawn brokers will come down considerably.
Do you offer any such products?
We offer Apna Gold 24x7 – a gold loan that can be linked to a customer’s savings account. Under the plan, customers can pledge their idle gold jewellery with the bank just like putting it in a bank locker and the bank will sanction an overdraft equivalent to 75 per cent of the value of the gold. We provide an ATM card, net banking and mobile banking for using the loan amount. Also, customers are given flexibility to take back and use the jewellery as and when they need it and deliver it back to the bank after use. Through this and similar products and offers the investment in gold can be made more liquid and productive while retaining the sentimental attachment to the gold.
business@thenational.ae
Follow The National's Business section on Twitter