Bengal's deposit-taking companies turn to gold retail

Several small deposit collecting companies devising gold jewellery schemes through retail outlets to stay afloat

West Bengal’s struggling deposit-taking companies, which are caught between an assiduous market regulator and anxious depositors, are now finding safe havens in gold.

Several small firms, which are in the business of collecting deposits, are devising gold jewellery schemes through retail outlets to stay afloat. In a typical gold jewellery scheme, a gold retailer collects monthly instalments from customers for 12 or 15 months, and offers discount on the gold value of the investments in the form of gold jewellery at the end of the term.

Rose Valley, which is waging a legal war with the Securities and Exchange Board of India (Sebi) for allegedly running collective investment schemes(CIS), is firming up its plans to launch a gold jewellery scheme soon, said the company’s agents. However, Indranil Paul, general manager (corporate communications) at Rose Valley Group, denied the company was planning to launch any gold jewellery scheme.

On Thursday, the Calcutta High Court had dismissed Rose Valley Real Estate and Construction’s petition challenging the constitutional validity of Sebi to regulate CIS.

 Recently, Vibgyor, another company which had been accepting public deposits, said it planned to set up retail chain of low-cost gold stores. Christened as V-Gold 125, the stores will sell jewellery priced between Rs 2,000 and Rs 15,000.

The company was thinking of having gold jewellery schemes, too, through the outlets, said Santanu Bhattacharya, managing director of Vibgyor Gold Ltd. The company has set plans to set up 10 V Gold 125 stores over the next two months, mainly in suburbs — its traditional stronghold. Last year, Vibgyor was hauled up by Sebi for allegedly issuing securities to the public, in breach of rules. Vibgyor Allied Industries was in the list of companies alleged to have carried out multi-level marketing schemes, according to a Lok Sabha document.

ICore E Services, which had been raising funds through debentures, was in news recently for defaulting on repayment obligations. The company was planning to launch gold schemes through its retail outlets, according to agents of the firm. Meanwhile, Sebi is finding it tough to crack down on unauthorised money-raising entities in West Bengal.  In the past year, Sebi has passed at least four orders against deposit-taking entities. However, the business of deposit-taking remains unscathed.

Most of the deposit-companies had been raising money in the disguise of advances for unknown real estate projects or booking hotel rooms. The firms offered three options: fixed deposits, monthly interest schemes and recurring deposits. There was no stated rate of interest, only promises of double the money in five years’ time. After the Saradha scam, these companies have been finding it difficult to meet redemption demands, with the fresh inflows coming to near zero.