In times of financial crunch, gold often comes to the rescue. In India, people across income groups invest in gold — be it the wealthy or the middle class. Not only is it a form of savings, but it also opens the door to gold loans, where individuals can pledge their gold and receive money in return.
With the rising prices of gold and increased demand, gold loans have become more popular. To ensure transparency, the RBI has implemented a stricter draft framework so that all lenders follow uniform rules and avoid confusion. Here's a comprehensive guide to the cheapest gold loan options and key things to know before you go ahead.
| Bank/NBFC | Interest Rate | Loan Tenure | Processing Fee |
|---|---|---|---|
| SBI | 8.55% – 10.25% | 3 to 36 months | 0.50% of loan amount, min ₹500 |
| HDFC Bank | 9.30% – 17.86% | 3 to 24 months | Up to 1% of loan amount |
| Axis Bank | Starts at 17% | 6 to 36 months | ₹300 to 0.5% (depends on loan) |
| Canara Bank | 9.25% | 12 to 24 months | 0.50% of loan, min ₹500 |
| Bank of Baroda | Starts at 9.15% | 12 to 36 months | No fee up to ₹3 lakh |
| Punjab National Bank | Up to 9.25% | As per bank | 0.30% + GST |
| Central Bank of India | 8.40% – 9.50% | Up to 12 months | 0.50%, min ₹250 |
| Kotak Mahindra Bank | 8% – 24% | Up to 4 years | Up to 2% + GST |
| Federal Bank | Starts at 8.99% | As per bank | Up to 3% + GST |
| Indian Bank | 8.65% – 10.40% | Up to 12 months | Zero |
| IDBI Bank | At bank’s discretion | 3 to 36 months | 1% |
| IndusInd Bank | 9.60% – 16.00% | Up to 12 months | 1% + GST |
| Bajaj Finserv | Starts at 12.99% | 1 to 36 months | As per company policy |
| Muthoot Finance | 12% – 27% | 7 days to 36 months | Varies by scheme |
| Manappuram Finance | 14% – 29% | 3 months | As per company policy |
Source: ClearTax
The amount you can get depends on the value of the gold you pledge. This is determined by the Loan-to-Value (LTV) ratio. As per RBI rules, the LTV cannot exceed 75%. For example, if your gold is worth ₹1,00,000, the maximum loan you can receive is ₹75,000.
The value of your gold is based on its purity and weight, typically calculated using the 30-day average price from IBJA (India Bullion and Jewellers Association).
According to S. Sathya Ramanand of HDB Financial Services, before opting for a gold loan, carefully evaluate:
Interest rates
Loan tenure
Repayment terms
Processing fees
Hidden charges or risks
Sometimes, attractive offers may come with hidden penalties or high late payment charges. Always read the fine print and choose a trusted lender — don’t fall for low interest rates alone.
Most banks and NBFCs accept jewelry made of 18 to 22 karat gold. Some also accept 24 karat bank-issued gold coins, usually with a limit of 50 grams per customer. Items like gold bars or bullion are typically not accepted.
If gold prices fall significantly and the value drops below the 75% LTV ratio, the lender may ask you to:
Pledge additional gold, or
Repay part of the loan
Minor fluctuations don’t usually affect the loan, but in volatile markets, this is a potential risk. If prices rise, you benefit only if you prepay and refinance your loan.
Avoid a gold loan if:
You're unsure about repaying on time
You’re planning long-term borrowing
Your gold has emotional or sentimental value
You don’t understand loan terms or aren’t financially disciplined
If you default, your gold may be auctioned, and your credit score will be affected — making it harder to get loans in the future.
Your gold will be confiscated and auctioned
A loan default is reported to credit bureaus
Late fees and penalties will increase your debt
Your creditworthiness for future loans will be damaged
Gold loans can be a great short-term solution for urgent needs like:
Medical emergencies
Children's school fees
Temporary business expenses
But they require careful consideration. Compare interest rates, check the processing fees, understand repayment terms, and always borrow from a reliable lender. Don’t let a short-term fix become a long-term burden.
