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Gold Coins Discount for India Rail Employees

State Bank of India offers gold buying incentive...

INDIA'S LARGEST commercial bank, the State Bank of India, has turned out a special salary package for railway employees. Though employees can avail themselves of car loans, home loans and personal loans at reduced interest rates, the biggest draw is the discount offered on purchases of Gold Coins, writes MineWeb's Shivom Seth in Mumbai.

For a country where the love for gold is almost a religion, the State Bank of India, which is the largest lender in the country, has decided to discount the purchase of Gold Coins for every salary holder.

"Gold has become an inseparable part of the Indian society and fused into the psyche of every Indian. The special privileges will be offered to the employees of the Indian railways who draw their salary from the State Bank of India," said Venugopal Reddy, manager at the administrative unit of the bank.

With approximately 1.44 million employees, Indian Railways is the world's second largest employer and the largest employer among public sector undertakings in the country. A Brahmo, chief personnel officer of South Western Railway, said Indian railways has the fourth largest railway network in the world.

"Around 46% of railway employees draw their salaries from State Bank of India while the remaining 54% employees get their wages from other banks," he said. Though some banks also offer discounts on purchases of Gold Coins, this solely depends on the denomination. 

The State Bank of India is aiming to ensure that employees get a higher discount if they Buy Gold on their salary account. Moreover, employee numbers are expected to swell with 7,000 more staffers joining the ranks in the near future.

Keeping in mind the country's massive appetite and demand for the precious metal, banks in India have ramped up lending to investors against the yellow metal. Prompted by higher margins, banks have expanded their respective portfolios as gold financing has become a secured form of lending, said bankers.

"India's top banks are now vying for market share in the gold loan business. Loans against gold are considered priority sector advances and the business has become doubly attractive for banks in the public sector," said Tarun Shah, bullion expert.

According to statistics from India's apex bank, the Reserve Bank of India, 18 of the 26 public sector banks, including five associate banks of State Bank of India, have missed their agricultural lending targets for 2010-11. Most, including State Bank, have diverted to facilitating gold loans.

India's second largest private sector lender, HDFC Bank, also reported doubling its gold loan portfolio in the last 12 months spurred by investor demand. "State Bank of India, which has branches all over India and abroad, is the market leader. The strong demand for gold loans, both in urban and rural centers, has benefitted the bank well. Especially in rural areas, it is one of the most popular loan products," said Shah.

He added that banks expect gold loans to provide an opportunity to cross-sale other products and services to customers who have borrowed against the yellow metal. The State Bank that sells Gold Coins in various denominations for its retail customers has witnessed a massive spurt in buying with every drop in the price of gold. The demand for Gold Coins – available in denominations from 2 gram to 50 gram – is sluggish when Gold Prices shoot up.

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Founded in 1999 as part of the Johannesburg-listed MoneyWeb media group, Mineweb is one of the world's leading sources of mining and metals-investment news, comment and analysis. Managed since 2003 by professional mining engineer Lawrence Williams – formerly of Mining Journal, and with more than 30 years' technical and financial experience in the sector – MineWeb provides thorough, international coverage of the natural resources industry.

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