Gold loans are simple secured loans that individuals can avail by offering gold jewellery as collateral to lending banks. For those who need a quick solution to short-term liquidity issues, gold loan is ideal, as it is relatively hassle-free and quick. Being secured loans, gold loans involve shorter processing times ranging anywhere between 1 and 3 hours, no lending banks currently require salary proofs to give gold loans, and simple documents like PAN card, driving license or other Government-issued IDs are sufficient to get the loan. Further, if you take the loan from the same bank in which you hold an account, you may be eligible for special offers such as processing fee waiver and better interest rates.
Gold loans involve an application process along with various charges and fees that vary between providers. While some banks and NBFCs charge a processing fee, others may waive it off. The same applies for the pre-payment penalty – some banks charge a penalty when you pay off your gold loan before maturity, while others waive it. Also, providers having in-house valuators may waive off the valuation charges that are otherwise payable to valuators. Most gold loans carry a late payment penalty that differs according to the lending institution and the amount of loan.
Lenders charge interest on gold loans based on the ratio of the loan to the value of the gold ornaments – this is known as the LTV ratio.
Listed below are the most popular gold loans offered by some of the leading banks in India:
1) HDFC Bank
HDFC is the only bank offering gold loans without documentation. They also offer the convenience of over-the-counter loan disbursement.
In HDFC’s Sampoorna Bharosa gold loan scheme, gold loans for less than Rs 50,000 are available for rural customers, while for urban areas, the minimum loan amount is Rs 50,000.
Interest rates start at 10%. For HDFC customers, even lower interest rates are available. Moreover, special rates are offered to women customers and preferred banking customers such as Imperia and Classic.
HDFC charges a minimum loan-processing fee of 0.50% of the loan amount. Additionally, HDFC has a valuation charge, stamp duty, applicable service charges, and up to 1% charges for prepayment/late payment.
2) Axis Bank
Any individual aged between 18-75 years qualifies for a gold loan with Axis Bank. The bank offers the convenience of same-day loan disbursement.
Axis has Rs 4 lakh loan limit for new customers, while for existing customers, i.e. account holders, the gold loan limit ranges from a minimum of Rs 25,001 going up to a maximum of Rs 20 lakhs. Interest rates start from 14.50% going up to 17% per annum. The bank collects Rs 500 as valuation charges and levies 1% processing fee.
Axis Bank offers flexible loan tenure ranging from 6 to 36 months. Further, customers may foreclose the loan at any time without having to pay prepayment/part payment penalties. However, in case of late payments, a 2% charge per month is levied on the overdue amount.
3) State Bank of India (SBI)
SBI offers gold loans to individuals aged 21 years and above. The minimum loan amount is Rs 10,000 for rural customers and Rs 20,000 for urban customers; and the maximum loan amount is Rs 20 lakhs for both. A 30-month repayment period is offered to borrowers, and processing fee starts from Rs 256 going up to Rs 1,022 on non-hallmarked and hallmarked jewellery – this amount may vary as per the loan amount and various other factors.
The rate of interest starts at 11.5%. SBI account holders get a special rate. Further, SBI does not charge a prepayment penalty on its gold loans.
4) Central Bank of India
Central Bank of India provides overdraft or demand loans against the security pledge of 22-carat gold ornaments or against gold coins sold by the bank itself. The amount of finance offered ranges from a minimum of Rs 10,000 to a maximum of Rs 20 lakhs, the loan tenure is 36 months and the processing fee is 0.25%. For the OD facility, the rate of interest is 11.65%, while in case of demand loan, it is 10.65%.
The maximum limit to loan per gram is either 70% of the current market price of 22-carat gold or Rs 2,000 per gram of gold ornaments – whichever is lesser. For the OD facility, the limit is renewed on an annual basis.
5) Federal Bank
Gold loans by Federal Bank can be availed by customers for up to an amount of Rs 75 lakhs, carrying interest rates between 13-13.50% and having repayment tenure of 12 months. Borrowers are free to repay the loan either as a lump sum amount or in installments. Here, 22-carat gold ornaments are pledged as security.
Federal Bank does not levy any hidden charges or heavy penalties, while also offering hassle-free loan processing within just a few minutes.
Apart from the above banks, Mannapuram Finance and Muthoot Finance are the two active NBFCs in the gold loans domain.
- Manappuram Finance offers gold loans up to a maximum loan amount of Rs 1 crore. Interest rates start from 12%, processing fees go up to Rs 200, and there is no loan prepayment penalty.
- Muthoot Finance offers gold loans starting at a minimum loan amount of Rs 1,500 and maximum loan amount of Rs 1 crore. Interest rates start at 11% and the processing fees may be as much as Rs 500. Muthoot Finance does not charge any prepayment penalty either.
Table: Gold Loan offerings of Lending Institutions in Brief
Rural customers: available for less than Rs 50,000
Urban customers: minimum loan amount Rs 50,000
6 to 48 months
New customers: Up to Rs 4 lakhs
Existing customers: From Rs 25,001 to Rs 20 lakhs
14.50% to 17%
6 to 36 months
Rural customers: From Rs 10,000 to Rs 20 lakhs
Urban customers: From Rs 20,000 to Rs 20 lakhs
Central Bank of India
Rs 10,000 to a maximum of Rs 20 lakhs
For Overdraft facility: 11.65%
For demand loan: 10.65%
Up to Rs 75 lakhs
13% – 13.50%
Up to Rs 1 crore
Rs 1,500 to Rs 1 crore
14% – 24%
1 to 12 months
Note: Interest rates and other loan terms are subject to change from time to time.