Are banks safe to vault your Gold?

February 12, 2009

Commodity Online
MUMBAI: When you buy gold, where do you store them? This is a question that many Indians – largest consumers of gold – ask themselves.

The Indian women – smarter than their counterparts in western world – do all tricks to hide them. They have to hide them not only from pranksters and robbers but also from the prying eyes of their own people – mostly husbands.

If you go by a traditional Bollywood masala movie, the script always revolves around a husband who needs gold – to sell off for hard cash - to fulfil his entertainment needs, liquor or mistresses.

To avoid this, rural women store gold in their grain boxes, wrap up in clothes, in vessels and at other innovative locations where suspicious eyes cannot reach.

If the men are co-operative, they help them safely keep it in electrical switch boards or other screw bound vaults – not safe by their own village standards. But the aim is to deceive the thief.

But thieves are smarter now. To counter their smartness is a tough task. Urban women, instead, use bank vaults. But are all these methods the best way to store tonnes of gold that India have today?

A few places have better options and one of the best options is to adopt something that firms like Bullion Vault, a London-based bullion trading company, does. Never take delivery and instead operate remotely – safe and sound.

These operators sell gold - refined by an accredited bullion refiner, stamped with a serial number and with a purity of at least 99.5%.

Bullion Vault says even the banks are not safe since ‘banks operate the wrong kind of business to be willing and reliable custodians of your gold’

‘Modern banks make their money by providing credit, and by executing transactions. They have little enthusiasm for a low margin role as physical custodians of bullion. Very few of them actually manage bullion vaults at all,’ says Bullion Vault.

India’s vaults – mostly in banks – are handled by inexperienced hands. “Yes the banks are very good in managing vaults. But they are not good in managing what we keep inside these vaults,” says Raj Kaushal, a retired teacher who had to fight getting a few ounces of gold which he kept in a bank vault – also known as locker – and lost.

The bank in question did repay the value of his lost gold but he had to meet top officials and a lot of correspondence to get his due.

He agrees with Bullion Vault philosophy that there should be clear standards for safeguarding each commodity. It says for firms dealing in gold vault business the core business must not be based on, or related to, the creation and sale of financial or credit products, .They must be very experienced in managing bullion, must have multiple international vaults under their management and must be competent to undertake international shipments of gold.

“Neither of these are bank’s business,” says Makrand Patil, a banker in Baroda. “Lockers in banks are just a value added service at a small cost. Banks don’t exist to manage what is inside those lockers. We just safeguard them irrespective of whether you keep gold or just a match box,” he added.

“You cannot ask a warehouse manager safeguarding wheat and rice to safeguard gold and not vice versa. Expertise is very much necessary,” Kaushal argues.

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