Gold lying in your locker can generate income; understand the ins and outs of gold leasing..

In India, most people view gold as a secure asset and a means of saving. People often buy gold and store it in bank lockers or home safes, leaving it untouched for years. While the value of gold may appreciate over time, it does not generate regular income for the owner. In many families, gold jewelry is preserved across generations, and its value is realized only when it is sold or pledged.

In this context, gold leasing has emerged as a new option. Under this arrangement, you lend your gold to a jeweler or an institution for a specific period and earn a return (interest) on it. Crucially, you retain ownership of the gold.

How does gold leasing work?
In gold leasing, you lend your gold to jewelers who require it for manufacturing jewelry. In return, they typically offer an annual return ranging from 2% to 7%. This return is received in the form of additional grams of gold rather than cash. For instance, if you lease 100 grams of gold, at the end of the tenure, you receive back the original 100 grams plus some extra gold as interest. Some banks offer this facility under the RBI's Gold Monetization Scheme. Various fintech platforms also provide this service, facilitating the lending of your gold to jewelers in exchange for interest.

Can digital gold also be leased?
Some experts suggest that leasing digital gold is a possibility. However, legal experts point out that digital gold is not yet fully regulated in India. Consequently, investors do not enjoy the same level of protection as they do in the stock market, and digital gold leasing is not currently considered widely available or secure.

Is there insurance coverage for gold leasing?
Gold leasing does not enjoy government-backed insurance protection like bank deposits. While some private platforms claim to provide insurance coverage, this is not a universal feature. According to experts, private digital gold leasing is not directly regulated by either the RBI or SEBI. Therefore, if the platform or the jeweler defaults, the investor will not receive government protection.

Benefits of Gold Leasing
You can earn returns on your gold without selling it.
Instead of lying idle in a locker, the gold starts generating income.
Interest is also received in the form of gold.
If gold prices rise in the future, you could gain additional profit.
Jewelers do not need to take out expensive loans.

Risks of Gold Leasing
1. Risk of Default

If the jeweler or the borrower fails to return the gol

d, the investor could incur a loss.

2. Market Risk

Interest is earned in grams of gold. If the price of gold falls, the rupee value of your investment may decrease.

3. Liquidity Risk

Your gold remains locked for the duration of the lease. You cannot sell it immediately if the need arises.

4. Platform Risk

If the company facilitating the gold leasing faces a financial crisis or shuts down, there could be delays or legal complications in recovering the gold.

What to Consider Before Investing?
Experts advise that before investing in gold leasing, you should verify that ownership of the gold remains in your name, adequate insurance coverage exists, independent audits are conducted, and both the platform and the jeweler are reliable and verified. Additionally, ensure that all legal terms are documented in writing. While gold leasing offers an opportunity to earn returns, it also carries risks; therefore, gathering full information and exercising caution before investing is essential.

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