How a gold overdraft can double up as a cost-effective bank locker

Unlike lockers, gold pledged under overdraft is also insured by a bank, offering better protection against losses

- Jash Kriplani

Getting a locker facility with a bank is not an easy task. In several cases, there is a huge waitlist for lockers because of high demand and banks often ask customers to buy other products—insurance or make fixed deposits—to expedite locker availability. However, there is a hack you can use to store your valuables with the bank without necessarily waiting for the locker facility, but with certain caveats.

Enter gold OD Gold overdraft (OD) facility can be a hack for those looking for a locker facility for their gold jewellery. The OD facility entails extension of a credit line or OD facility from the bank, against collateralization of a gold asset. This gold is stored by the bank in its vault.

As it is an OD facility, the interest costs only come into play when you start drawing funds from the OD facility. Interest cost is not incurred otherwise. There are still some other costs. This includes 1-2% processing fee (of the OD amount), stamp duty and gold valuation fees.

For instance, on a gold OD of ₹2 lakh, the processing fee will come to ₹2,000 (1% processing fee), stamp duty of ₹600 and gold valuation fees of ₹1500. Processing fee and stamp duty will be recurring as and when the overdraft tenure is extended. The valuation fee will vary based on the value of the gold. In some cases, banks will embed the stamp duty charges within the processing fee.