Taking ‘jewel loan route’ to bank locker

You may have heard this anecdote, of a customer who walks into a top bank in New York and asks for a loan of $10,000. He informs the loan officer that he needs the money for a two-week European holiday. Asked to provide collateral, the customer readily hands over the keys of his brand new Merc. Once the due diligence is done, the loan is approved and bank officials take possession of the car. They drive it into their garage, chuckling about the irony of getting a $1,00,000 collateral for a $10,000 loan.

When the customer returns after a fortnight, he repays the $10,000 along with some interest that works out to about $50. While expressing happiness about the satisfactory conclusion of the deal, the banker makes bold to enquire why the customer needed a loan for a paltry sum when he was obviously a rich man. The reply: “Where else in Central New York can I have my car parked with security for two weeks for just fifty dollars?”

We thought it was a good joke. Till we overheard what happened at a bank counter last week.

A bank customer tried out almost a similar ploy to ensure the safe custody of his jewels. Normally, you would expect him to apply for a bank locker. But getting them requires a lot of charm or clout with the branch manager — given the long waiting list. So here is the modus operandi to achieve the objective.

The modus operandi

The customer, Mr Prakash, applies for a jewel loan by pledging his jewels/gold holdings and offering them as collateral, in return for a small loan from the bank. He then parks the amount received as a deposit with the bank. This fetches him some return, while his jewels are safe. The charge for servicing this loan is also not much as he only has to pay the difference between the interest rate on his loan and the return on his deposit.

Aren't bankers averse to such a scheme? Says the banker, “It's ultimately a business deal; as you can see, we have no space for additional lockers in this branch. Customers who enjoy locker facility rarely surrender their locker. So when a customer approaches us with a genuine reason, we see no reason to turn down his request. In Prakash's case, he is planning to visit his son in Singapore and will be away for six months.”

That's a trend that's catching on!