MUMBAI (Commodity Online): If you are planning to buy Gold Bars or Gold Coins from bank, here is a deterrent. You cannot sell it back to the banks.

Now this seems to be very strange as gold is a liquid commodity and is recyclable and can be stored unlike base metals. The banks also have facility to store huge quanities of gold as they do in the case of many shrines and temple boards. Then why is that the banks cannot buy back the commodity they have sold to a client?

The answer is with RBI which has allowed only one way transaction for banks, If you want to sell the same gold, you have to find a local jeweler. It is emerging that there have been many representations from banks to have the two way transactions but RBI has so far refused to entertain it.

But it has allowed Non-Banking Financial Companies, more known as NBFC, to carry out bi-polar transactions. But they prefer to mortgage gold in exchange for money than to buy it outright. They buy it only of the coins are brought from them and the bill is produced at the time of sale.

But despite these shortcomings, investors prefer to buy from banks because of the guarantee and trust banks give and then turn to NBFCs to either pawn or sell the same. Only traditional and well known jewellery shops do brisk business during festivals selling bars or coins.

Though original gold – bars and coins – do not have differentiation in quality wherever you buy it from, unfortunately selling joints discriminate them for reducing its prices. If you buy a bar from a particular shop and sells it in other, the second shop keeper always puts a cut for the fact that he is buying back a bar that he has not sold and as if he is doing an obligation by doing so.

“It is actually discriminatory and against ethics. Gold is a commodity and it is not manufactured by the shop keepers. Why should they cut the prices then?” asks Mihir Joshi, an ardent gold fan in Mumbai.

Though the Futures market is regulated by a single entity – FMC, spot markets are not. Moreover there are VAT differences in different regions. This makes gold prices vary from region to region. But what is intriguing is that the same gold prices vary from banks to banks too. Different banks charge different prices for the same quality of gold for reasons unexplained. Though this price difference is not as much to take notice of, the absence of a regulator in spot market scenario is clearly visible in such a pricing.