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Paytm sets sights on Digital Gold

The digital payments company officially introduced the new platform on Thursday in partnership with India's only internationally-accredited refinery MMTC-PAMP, which will store the gold

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With its mobile payment and e-commerce platforms having taken off successfully, Paytm is now eyeing huge gold market with the launch of Digital Gold, where people can buy, sell and store the yellow metal for as low as Re 1 or lesser than one gram.

The digital payments company officially introduced the new platform on Thursday in partnership with India's only internationally-accredited refinery MMTC-PAMP, which will store the gold. Paytm will do the certification and delivery of the precious metal.

Vijay Shekhar Sharma, founder of Paytm, said the 24-karat-999.9 purity gold sold on the platform would have uniform prices across India linked to the prevailing international prices during the time of buying. It would not reflect the wide variations that exist between gold prices across different locations or states in India.

He said the minimum quantity required for gold bought and accumulated by Paytm users to be redeemed was one gram.

Indians are the largest consumers of gold in the world as it is seen as a safe haven and purchased on auspicious occasions such as weddings, festivals and other celebrations.

However, government's recent restrictive policy initiatives and demonetisation of around Rs 15 lakh crore worth of Rs 500 and Rs 1,000 notes have adversely hit the demand for the yellow metal; last year, it fell to the lowest level since 2009.

The latest report on gold demand published by World Gold Council has, however, given an optimistic outlook for the previous metal in 2017.

"It's clear that India's gold market faces short-term headwinds. But looking ahead, these policies promise to deliver a stronger and more transparent economy. This will support gold demand, which we expect to be between 650-750 tonne in 2017," it said in the report.

Navin Kumar, managing partner of investment banking consulting firm OakBridge Consulting LLP, sees Digital Gold promoting investment in the form of gold.

He, however, does not feel it will make any significant difference in terms of the trend in gold demand, "It may not necessarily impact the gold demand. It is basically a platform to overcome the cash issue because smaller jewellers still prefer to do cash transaction vis-à-vis a card transaction where they need to pay a small amount as service charge which obviously no jeweller would like to pay".

According to him, it will facilitate smaller size gold transactions, which were being postponed because of shortage of cash and enable users to save regularly in digital gold for long-term wealth creation.

Cumulative transaction above Rs 50,000 will mandate adherence to KYC rules and for any transaction higher than Rs 2 lakh, a user will be have to submit PAN card details.

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