Gold loans (or gold deposits) may be undertaken to obtain an income return on gold.

The
gold that is placed on loan (or deposit) may be either a financial asset (i.e., monetary
gold) or a non- financial asset (i.e., non-monetary gold.) The gold remains on the books
of the gold lender, and the lender retains the exposure to the market risk arising from
movements in the market price of gold. Loan against Gold Ornaments is a product
designed to provide liquidity against gold ornaments without having to sell them. Gold
ornaments lying idle can be put to productive use by availing Loan against Gold
Ornaments. Loan will be sanctioned on submission of all the required documents and
satisfactory assessment of gold ornaments. Loan amount is disbursed by cash, DD or
funds transfer to an account (as the case may be).
 
In the case of default in repayment, penal interest (as the case may be) will be charged
around 2% per annum over and above the normal rate of interest

The product is packed with features such as:

 Hassle-free quick processing of loans.

 Simplified paperwork.
 Easy payment options.
 Attractive interest rate.

Gold loans (or deposits) are not backed by cash collateral and, in some cases, are not
backed by non-cash collateral. However, the gold may be on-sold by the borrower. With
Gold Loan, you can get an instant loan against your gold jewellery and ornaments. The
procedure is simple, documentation is minimal and approval is quick.

    Benefits   
Features & Benefits

 You can avail Loan upto Rs.20,00,000 & upto 80% of value for any purpose
 Safety & Security of your Gold Jewellery
 Loan processed in 30 Minutes
 ATL - Anytime Liquidity
  No EMI, Service only Interest and enjoy the Loan facility
 Lower Interest Rates
 Simple documentation and fast processing.
 Overdraft limit varies depending on the market rate of gold.
 Interest rate is payable only amount of the overdraft that you use.
What is Gold Loan?
As the name suggest its loan against Gold. It’s the most convenient way to receive cash in no time from any NBFC/Bank by pledging your
Gold ornaments/Coins/bars/Exchange traded funds ETFs/ SBI gold certificates etc., this is one loan product which comes with minimal
documentation & no processing time in short its over the counter product. 
Product is designed in a way it ensures hassle free process for the customer & loan availed can be put to any use. 
Loan amount eligibility is evaluated basis on the Gold value banks usually fund 70-80% of the gold market value & on repayment of the loan
gold deposits are returned back to the customer. 
This loan comes much cheaper than personal loan as it’s a secured product & rate of interest ranges between 11.5-24% per annum. 
Rate of interest is decided on two factors risk criteria ( What % of market value of Gold you are availing loan if its 90% of the Gold market
value then interest charged will be higher & vice a versa for lower loan amount as compared to gold value) & customer relationship with the
bank. 

Features of Gold Loan:

• Fastest loan disbursal
• Most convenient way to arrange funds
• Low Documentation
• No pre-payment charges
• No loan amount cap (you can avail as low as 10,000)

Process for availing Gold Loan :

• It’s a four step process:
• Loan Valuation: Banks carries out valuation of Gold & decides on the loan amount eligibility.
• Documentation: Usually banks/NBFC takes photo id & residence proof of the applicant.
• Signing of Agreement: Terms & condition of the loan are signed by the loan applicant.
• Loan Disbursement: Cheque is handed over to the customer over the counter after signing agreement at same time. 

Gold loan business In India

 

Hardeep Singh Saini 

SEO
With demand and price of the yellow metal rising, loan against gold is also becoming popular. As of FY10, the organised gold
loans market in India is estimated at around Rs 35,000-40,000 crore, registering a growth of 50 % over last year. At this level, the
gold loan portfolio translates into a marginal 1.2 % of the value of total gold stock in India, indicating that the market is
significantly under-penetrated and is expected to continue growing at the rate of 35-45 %.

According to IMACS gold loan report, as of FY10, the gold loans market is largely concentrated between two categories of lenders —
south-based NBFCs specialised in gold loans accounting for around 32 % of total market and scheduled commercial banks holding
another 58 % of the market. The rest of the gold loans portfolio is constituted by several small co-operative banks.”

Why a gold loan

Gold loan as a concept is already popular in the South India through many organised and un-organised lenders. South-based
companies are looking to expand beyond South India with branch expansion and heavy advertisements. “South-based gold loan
companies like us are expanding into North India as gold has now become a lifestyle product and most of the Indians buy gold. In
times of need one can get a loan against gold within minutes with minimum formalities,” says Muthoot Pappachan Chairman &
Managing Director John Muthoot.
Commodity experts feel that since gold as an asset class earns profit only when sold, it makes sense to use the metal to take a loan
in times of emergency. Gold, unlike equity, does not earn any dividend. If you do not wish to sell it, but need money urgently, gold
loan can be a good option. One of the best features of a gold loan is that you can get the loan on the same day itself. Also the
interest rate you pay on the loan is comparatively lower than a personal loan and chances of getting the loan are higher.

Comparing personal loan and gold loan, Manappuram Finance Managing Director I. Unnikrishnan says, “in times of emergency you
need a loan almost immediately with minimum documentation, and without any evaluation of your loan repaying capacity and if
you have gold it can be a better option compared to a personal loan where all these factors come into play.” A number of public
sector and private banks and non-banking finance companies (NBFCs) are offering gold loan.

Which lender to approach

Till now gold loans have been a bastion of small-time money lenders and NBFCs. But with banks looking at expanding the secured
loan portfolio as against the unsecured personal loan, the options for the borrowers are aplenty. Most of the gold loan business are
in the unorganised sector and NBFCs. Experts caution borrowers to make proper inquiry about the pedigree and the track record of
the lending agency before pledging gold for a loan.

Says author of ‘Retire Rich’ PV Subramanyam, “try a public sector bank for taking gold loan as gold loan is a secured loan. Banks
are well regulated, are sound and carry lesser risk compared to a non-banking finance company.” With high emotional value
attached to the jewellery you pledge, it’s better to opt for a lender which is stable, well diversified and is in the gold loan business
for a long period.

Interest rate & tenure

When was the last time you brought your negotiation skills into play? It’s time to use them now if you are looking for a gold loan.
There are various parameters on which the tenure, interest rate and the level of negotiation would depend — like whether the gold
is hallmarked or not, the tenure of the loan amount and what percentage of the value of the gold you would like to borrow.

Click here to Apply for Gold Loan

NCDEX Chief Business Officer Vijay Kumar has a smart advice for borrowers: “if you have a good quality hallmarked gold and the
value of the gold you want to borrow is 60 % or less you may negotiate for lower interest rate from the lender.” Typically, the
tenure on a gold loan falls between one year to two year with some lenders even extending loan for three years. The documents
required are residential proof and a recognised photo identity for example a PAN card, voter Identity card or driving license. The
banks may take an hour to a day to extend the gold loan. On the other hand, NBFCs like Muthoot Finance and Manappuram, going
by their advertisements, extend the loan within minutes. The average rate of interest falls between 11 % to 14 %. However, some
NBFCs are charging a much higher interest rate of 20-24 %.

What are the inherent risks?

Even though the gold loan may seem to be an easy option to borrow money there is a word of caution from the financial experts
who advise that taking a gold loan for buying luxury items or for consumption purposes may not be a great idea.

Experts hence advise to go for a small loan and for a small tenure. Only if you think you can repay the loan should you go for the
gold loan. Though gold loan lenders fall under the Reserve Bank of India's supervision, there’re experts who doubt whether non-
banking finance companies lending against gold are as strictly regulated as banks. Financial experts advise to take a gold loan in
small sums and make sure that you have enough liquidity to repay the loan and get the gold back. The gold you have pledged with
the lender is usually auctioned 12 months after the due date of repayment has lapsed.

If you have a short-term liquidity need and you are sure of repaying the debt in time you can count on the asset created by your
wife — only if you take it out from your locker and unlock its value.

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