The negative lease rates in the international bullion market for over a period of six months have led to the jewellers asking for lower lease rates.

However, banks and nominated agencies that are allowed by RBI to import gold in the country say that they have to pay a premium above the lease rate, despite the rates being negative for quite some time now.

The current one-month lease rate in the market is at a negative 0.15% and the six month rate is 0.17%. Irrespective of this, a gold jeweller pays between 5% and 8%, depending upon the kind of collateral against the credit.

The gold lease rate is the rate at which the overseas banks lend gold to each other or the jewellers. This rate depends upon the duration of the loan one, two, three, six, twelve months. It is calculated by deducting GOFO (gold forward offer rate)- the rate at which members of London Bullion market association (LBMA) lend gold on a swap against US dollars from the LIBOR (London inter bank offer rate).

Though these rates have fallen below zero, it does not imply that banks overseas are lending the gold and paying a consideration to the borrower. Rather, they are charging zero or close to zero rates. In the case of Indian lenders, these suppliers charge something Libor. The Indian bank adds its own mark-up to the lease rate to maintain the net interest margin requirement.

Apart from this, charges like customs duty, stamp duty, octroi and the transportation costs are also passed on to the customers. Stamp duty and Octroi are only applicable in the state of Maharashtra.