Aug 30, 2010 (LBO) – Sri Lanka’s Commercial Bank said it has started an overdraft facility backed by gold at 15 percent a year for current account holders, which the bank said is lower than the rate on regular overdrafts. “The Gold Overdraft is an ideal solution for those who invest in the stock market, or who need funds for a short period pending the finalization of a regular loan facility, Vimal Fernando, Commercial Bank head of personal banking said in a statement.
“It also provides another significant benefit — safe custody of a customer’s gold and jewellery.
“Excess jewellery or gold that has been accumulated, can now become a productive asset for the owner and contribute to wealth generation or other needs.”
The bank will offer the overdraft against 18 karat or better gold.
Sri Lanka has a traditional small credit facility called pawn broking where money can be borrowed against jewellery. Gold prices have risen steeply during the current global financial crisis and collapse of the US banking system in particular. From 1792 to shortly after the creation of the US Federal Reserve, gold traded at around 20 dollars an ounce.
Following the end of the gold standard in 1971-73 gold prices h