The parable of the evolution of private banking comes about with a story about a goldsmith. The goldsmith has the strongest safe in town – so people deposit their gold for safe keeping. People consider the certificates of deposit equivalent to gold. The goldsmith however lends the gold in the vault for a fee. That is real gold. And thus banking acts as a gold multiplier.
These days of course it happens with paper money. I have never borrowed gold – and nor has anyone in my usual social acquaintance.
But I am not Indian.
Extracted from the State Bank of India annual report:
• The Bank has taken several initiatives to undertake bullion business in a big way.
• The number of branches for retail sale of gold coins has increased from 250 in 2008 to 518 in 2009. The Scheme will be extended to cover all important centres of the country in 2009-10 by increasing the number of branches selling gold coins to about 1100. The Bank also undertakes supply of customised gold coins to corporates.
• The Bank has re-launched Gold Deposit Scheme at 50 branches to mobilise gold from domestic market for deployment as metal loans to jewellers.
• The Bank is in the process of setting up a dedicated Bullion branch at Mumbai to undertake bullion business in a focussed manner.