Bullion India – A new player in India
Bullion India recently launched an online platform to enable retail investors in India trading in gold and silver bullion. According to the provided information, the electronic investments units are backed by physical gold and silver and clients can take delivery of their bullion holdings.
Bullion India (www.bullionindia.in) is the first product of Finkurve Bullion Private Limited (FBPL). According to Bullion India’s website, FBPL plans to launch several structured products based on bullion in the future. Bullion India’s aim is to offer private investors in India to purchase and own gold and silver bars also in small denominations.
Bullion India’s offering
Bullion India’s platform is only available to Indian citizens, who are residing in India. Non-Indian citizens and non-resident Indians can currently not become customers of Bullion India.
The minimum investment or purchase amount with Bullion India is 0.1 grams of gold or 1 gram of silver. Through its websiite and online trading system Bullion India is offering clients to trade, i.e. buy or sell, electronic units, so called G-Units (gold) or S-Units (silver). A G-Unit represents 0.1g of gold, while a S-Unit represents 1 gram of silver.
According to BullionIndia, the prices for G- and S-Units “will be mapped to that of physical gold and silver”. Please see the section on Fees of Bullion India below for more information.
Bullion India states that “These units shall be backed by equivalent quantities of physical gold, silver etc.”. Bullion India clarified in an email to us that “All the units bought by the Bullion India Member are backed up by exact quantity of physical gold and silver which are stored in Vaults with the Security agencies”.
According to Bullion India, those quantities of gold and silver are stored by LBMA accredited security firms such as Brinks and insured.
Clients of Bullion India can redeem their holdings and request delivery to their private addresses for quantities starting with 1 gram of gold or 10 grams of silver.
Partners of Bullion India
Bullion India was developed by Finkurve Bullion Private Limited (FBPL). Finkurve Financial Services Limited (FFSL) is a Non-Banking Financial Company, that started as a lender to corporate customers in 1984 and recently started offering bullion- and foreign exchange based financial services.
NCDEX Spot Exchange Limited (NSPOT) is another partner of Bullion India. NSPOT is a leading Indian Spot Exchange, which trades, e.g., in commodities and precious metals.
RiddiSiddhi Bullions Limited (RSBL), a leading Indian bullion trader, is the market maker for the Bullion India platform, i.e. it sells and purchases all precious metals traded through Bullion India. RSBL will promote Bullion India through its network of thousands of jewellers, who operate on its platform RSBL Spot.
Fees of Bullion India
Storage and insurance
Bullion India does not charge fees for storage or insurance of the quantities of gold and silver, which are used for backing the electronic gold and silver units.
Spread
Prices for buying or selling gold or silver through Bullion India are based on the spot prices of Bullion India’s partner RSBL.
Bullion India states on its website bid and ask prices for gold and silver. When we calculated the difference between buy and sell prices, the spread was just about 0.16%.
Interestingly, compared to the world market gold price in Indian Rupees stated by the World Gold Council at the same time, the mark-up of Bullion India’s purchase price for 0.1 grams of gold was more than 5%, which is quite hefty. The rates include 4% import duty and 1% VAT that is charged on Gold imported and sold in India. So there should be no significant mark-up to Indian sport prices.
This mark-up is also reflected in a higher selling price, in case clients sell their holdings or units through the Bullion India platform. But taking into account that a majority of customers in India ultimately will likely redeem their holdings and take delivery of physical gold or silver, the mark-ups could be an indicator for an implicit fee paid by the customers.
Redemption and delivery
When clients redeem their holdings and take delivery of their bars, they have to pay delivery charges. The charges for delivery of 1g, 5g and 10g gold bars are about 7.4%, 2.25% and 1.6% respectively. These charges include transportation, manufacturing and packaging charges.
Assessment of Bullion India
Bullion India makes different statements with regards to the physical backing of G- and S-Units by gold and silver. In the Frequently Asked Questions it is stated that “The gold and silver are in electronic form and backed by equivalent quantities of physical bullion” but it also is written somewhere else that “These units shall be backed by equivalent quantities of physical gold, silver etc.”.
The terms and conditions of Bullion India do from our view not help to clarify what investors really acquire when purchasing G- or S-Units. Possibly, investors only acquire claims against Bullion India – but no outright ownership or security interest in physical gold or silver. This could put investors’ funds at significant risk.
Bullion India sent us an email stating “When a customer/member buys Gold/Silver units (G-units/S-units)on our portal, this transaction is supplemented with a Tax Invoice which serves as a proof of the gold and silver bought by the client with us. The ownership of the gold and silver passes on to the client and we are just postponing the time of delivery to the client till the time he request for the same”.
Another point to consider is pricing and fees: Due to Indian import duty and VAT on gold, the sport prices in India are about 5% about world market prices. Those taxes are in general applicable for gold trading in India but not in other world areas.
The fact that storage and insurance are free for the client sounds at first glance very customer-friendly. But investors should ask themselves whether such an offering is likely to be sustainable or if there could be other, potentially not so favourable explanations for this. Such risk factors could be a limited backing of client holdings by physical precious metals or an actually limited or non-existent ownership of such quantities of physical gold or silver by the investor, as mentioned above.
Unlike trustable providers of vaulted gold, Bullion India does not provide insurance certificates or audit reports to its customers or prospects.
In summary, Bullion India might be an interesting alternative to physical precious metals traders in India. But investors, who are looking for a trustable gold offering, are well advised to compare Bullion India with other providers of gold investment products.