The concept of a loan against gold is nothing new in India, you pledge jewellery or coins, and lenders give you cash against the value of that gold (minus a margin). But recent data and regulatory changes have pushed this product into overdrive. Let’s explore what’s driving the boom, how interest and terms stack up, important risks, and what you should watch out for if you’re considering taking one.
What’s Behind the Rising Demand for Loan Against Gold
- Gold Price Surge
Gold prices in India have increased by about 23% in the current fiscal year, with 10-gram gold crossing â‚ą1,09,390 as of 12 September. Because of this, for the same quantity of gold, borrowers can now access more funds. - Tightening in Unsecured Lending
Personal loans and credit cards have become harder to access due to stricter underwriting, risk concerns, and regulatory oversight. That has pushed many people to choose gold loans as an alternative. - Regulation & RBI Policy Changes
The RBI has recently allowed banks to lend more against gold collateral and has been standardising norms for gold loans. Increased regulatory clarity gives both lenders and borrowers more confidence. - NBFCs Also Playing a Big Role
Non-bank financial companies (NBFCs) are disbursing large volumes of gold loans. Data show that, as of end-September 2024, NBFCs had retail gold loans of about â‚ą1.7 lakh crore, slightly more than banks in certain periods.
Key Terms & Interest Rates: What You’ll Likely Face
If you’re interested in a loan against gold, here’s how the terms tend to differ by provider. Markets fluctuate, so always check current offerings, but these are recent benchmarks.
| Lender Type / Bank | Interest Rate (approx p.a.) | Typical Loan Tenure | Processing / Other Fees | Loan-to-Value (LTV) Ratio & Other Conditions |
|---|---|---|---|---|
| Banks (e.g., SBI, HDFC, Canara, Bank of Maharashtra, etc.) | ~ 8.3% – 17.9% | From 3 months to 36 months / 1-3 years | Processing fees vary (some have flat %, some have minimum and maximum caps) | LTV usually up to about 75% depending on lender, purity, weight of gold, etc.; higher value if price of gold is high. Also margin & charges differ. |
| NBFCs / Gold Loan Specialists | Similar or somewhat higher, depending on risk, location, and purity of gold. Some rates go into the higher teens. | Usually short-term (3-12 months), though some longer tenures may be available depending on policies. | May have valuation charges, documentation charges, part-release charges. | Purity matters (22 carat / 24 carat), also weight, condition of gold, and overall value. |
What to Watch Out For / Pros & Cons
Pros:
- Quick access to funds: Since collateral is gold, documentation tends to be easier and disbursal faster.
- Lower interest than many unsecured options: Because risk to lender is mitigated by collateral, interest tends to be lower than many personal or credit card loans.
- Flexibility: You can use for emergencies, medical bills, business micro-needs, etc.
Cons & Risks:
- Gold purity & verification issues: If the gold’s purity or ownership is in question, lenders may undervalue it or reject it.
- Loan-to-Value limitations: You’re not going to get full market value; only a percentage based on LTV norms.
- Interest & charges add up: Processing fees, valuation fees, prepayment or foreclosure charges may apply.
- Risk of losing collateral: If you default, the pledged gold could be auctioned by the lender. Always check terms.
Recent Regulatory & Market Data Snapshot
- In FY26, banks disbursed â‚ą85,432 crore in gold loans, outdoing even home loans (â‚ą70,675 crore).
- Gold prices rose ~23% over the fiscal year, driving increase in loan amounts borrowers can access.
- NBFCs had ~â‚ą1.7 lakh crore in retail gold loans as of September 2024.
Is a Loan Against Gold Right for You?
If you’re considering a loan against gold, ask yourself:
- What’s your repayment capacity? Short tenure, frequent interest payments may be easier than long ones with interest compounding.
- Is your gold properly hallmarked and documented? This will affect valuation.
- Compare interest rates, processing fees, foreclosure charges among banks vs NBFCs.
- Understand the LTV the lender offers; you don’t want surprises.
Loan Against Gold remains one of the fastest, most accessible secured loan options for many Indians today. With rising gold prices, tighter unsecured credit markets, and favorable regulations, it’s become even more attractive. But like all financial decisions, success depends on the terms, your ability to repay, and reading the fine print.
