Monthly plans glitter no more for jewellers

After wooing customers with attractive monthly instalment plans, jewellery companies are now rushing to close these schemes.

The new Companies Act has made it mandatory for jewellers to treat the money collected through monthly instalment schemes for gold purchases as deposits and restrict the returns paid on them to 12 per cent. Also, the total money that can be collected through these schemes has been capped at 25 per cent of the net worth of the jewellery companies. The new Act came into force on April 1.

Currently, most small jewellers, who are hard-pressed for liquidity, pay interest rates of up to 36 per cent on one-year schemes. At the end of the tenor of the scheme, customers have to compulsory buy jewellery from the same shop by paying ‘making’ and ‘wastage’ charges. The additional charges levied on the jewellery makes up for the extra returns offered by jewellers.

Titan Company, which owns the Tanishq brand, has wound up its oldest monthly instalment schemes — Golden Harvest — and Swarna Nidhi. Kalyan Jewellers and Joy Alukkas will also close down their monthly schemes for purchasing gold.

Major jewellers such as GRT Jewellers, Tribhovandas Bhimji Zaveri, Prince Jewellery and Thangamayil Jewellery have schemes that make it affordable for customers to buy gold through monthly saving plans.

Vipin Sharma, Director (Jewellery-India), World Gold Council, said the industry is still studying the new clause in the new Companies Act and seeking expert advice on whether the restrictions would apply to them, as some of the schemes run by jewellers are old and popular with customers.

“The new changes may depress demand in the short term, but customers will get accustomed to the rule. Jewellers are also reworking their strategies. The long-term demand for gold jewellery is still strong in India,” he said.

The development comes at a time when the industry is expecting gold demand to improve. In a bid to bridge the widening current account deficit, the Government had imposed various restrictions on gold imports. Sandeep Kulhalli, Senior Vice-President, Retail and Marketing, Jewellery Division, Titan Company, said his firm has decided to shut the scheme in compliance with the norms cited in the Companies Act.

“We are working out a new scheme that is fully compliant with the Companies Act. We are planning to re-launch the Gold Harvest scheme in September,” he said, and added that money collected from customers under the Gold Harvest schemes would be returned in the form of jewellery, coins and cheques with additional benefits.

Tanishq runs over four such schemes and has about 550,000 account holders under these schemes.

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