Satya Prakash Saini, a small farmer from Rajasthan's Jhalawar district, had a reasonably good harvest last year when he managed to save Rs 25,000 after all expenses. As most villagers would do, Saini visited a local jeweller to buy some gold for his second daughter, who he plans to marry off four years from now.
But, alas, his precious saving was not enough to even buy 10 gram of 24 karat gold, priced at about Rs 28,000. Saini changed his plans and parked his savings in a three-year bank deposit. Some 750 km away to the north in Saharanpur district of Uttar Pradesh, horticulturist Rajpal Singh put his savings in a life insurance-plus-investment product for the same reason. "Gold has been preferred by our family as it is a symbol of prosperity and is a safe instrument. But this time I could not buy gold because of its steep price," says Singh, who belongs to Jaghetta Gujjar village.
Farmers in India, who have traditionally bought gold and silver for asset creation, are now increasingly opting for banking and insurance products due to soaring prices of bullion.So, while rural jewellers report a 25-30% fall in gold demand over the past five months, bankers say term deposit collections in rural areas have grown in double digits in recent months.
Economists say it's a welcome development not just for banks, but for the economy as well. "Gold as an asset class is unproductive in nature as it largely remains locked up in households. But banking instruments such as term deposits can be deployed for the benefit of the rural economy," says Anish Chakravarty, director and senior economist at Deloitte, Haskins & Sells, a financial advisory firm. "However, one critical component is that farmers should remain invested in these products to accrue the benefits," he adds. It's not just rural folks drifting away from the yellow metal. Gold demand in the country fell 42% during October-December to 173 tonnes, the World Gold Council (WGC) said in a report last week. The country's gold imports dropped 44% during the quarter to trail China for the first time as gold's popularity as an investment safe haven and a weakening rupee pushed prices to record highs. The WGC expects China to overtake India as the largest gold consumer in 2012 when Indian gold imports may fall by a fifth to 770 tonnes. Average gold price (24 karat) in 2011 was Rs 23,620 per 10 gram, 31% more than the previous year.
Now, it's more than Rs 28,500. Viraj Singh, a jeweller from Gurdaspur in Punjab, confirms gold demand has slipped. "Footfalls have dwindled as prices have gone up. They (farmers) must be investing in other instruments," he says. Banks are now aggressively selling products in rural areas. Kotak Mahindra Bank's Consumer Bank President KVS Manian says the maximum response has come from rural Punjab, Rajasthan and Uttar Pradesh, where his bank has increased deposit mobilisation in rural areas year-on-year by 70%, 85% and 39%, in the past five months. "People were lured by higher deposit rates and pumped in more money into term deposits.
But, alas, his precious saving was not enough to even buy 10 gram of 24 karat gold, priced at about Rs 28,000. Saini changed his plans and parked his savings in a three-year bank deposit. Some 750 km away to the north in Saharanpur district of Uttar Pradesh, horticulturist Rajpal Singh put his savings in a life insurance-plus-investment product for the same reason. "Gold has been preferred by our family as it is a symbol of prosperity and is a safe instrument. But this time I could not buy gold because of its steep price," says Singh, who belongs to Jaghetta Gujjar village.
Farmers in India, who have traditionally bought gold and silver for asset creation, are now increasingly opting for banking and insurance products due to soaring prices of bullion.So, while rural jewellers report a 25-30% fall in gold demand over the past five months, bankers say term deposit collections in rural areas have grown in double digits in recent months.
Economists say it's a welcome development not just for banks, but for the economy as well. "Gold as an asset class is unproductive in nature as it largely remains locked up in households. But banking instruments such as term deposits can be deployed for the benefit of the rural economy," says Anish Chakravarty, director and senior economist at Deloitte, Haskins & Sells, a financial advisory firm. "However, one critical component is that farmers should remain invested in these products to accrue the benefits," he adds. It's not just rural folks drifting away from the yellow metal. Gold demand in the country fell 42% during October-December to 173 tonnes, the World Gold Council (WGC) said in a report last week. The country's gold imports dropped 44% during the quarter to trail China for the first time as gold's popularity as an investment safe haven and a weakening rupee pushed prices to record highs. The WGC expects China to overtake India as the largest gold consumer in 2012 when Indian gold imports may fall by a fifth to 770 tonnes. Average gold price (24 karat) in 2011 was Rs 23,620 per 10 gram, 31% more than the previous year.
Now, it's more than Rs 28,500. Viraj Singh, a jeweller from Gurdaspur in Punjab, confirms gold demand has slipped. "Footfalls have dwindled as prices have gone up. They (farmers) must be investing in other instruments," he says. Banks are now aggressively selling products in rural areas. Kotak Mahindra Bank's Consumer Bank President KVS Manian says the maximum response has come from rural Punjab, Rajasthan and Uttar Pradesh, where his bank has increased deposit mobilisation in rural areas year-on-year by 70%, 85% and 39%, in the past five months. "People were lured by higher deposit rates and pumped in more money into term deposits.
Source: The Economic Times
