Banks have instructed their branches to ensure that gold loans availed of by customers are repaid and closed, and not renewed or upgraded.
Offering loans against gold has become popular in the recent years due to ease of process, lesser documentation, rapid availability of funding, and a variety of repayment options. Borrowers can pledge their gold as collateral and borrow the principal amount based on the gold’s purity, weight, and market rate. For non-agriculture gold loans, the Loan to Value is 75%.
The interest rates and tenure vary with respect to banks and there are various repayment options, including paying the interest and principal in equated monthly instalment (EMI), paying the interest as EMI and the principal at the end of the tenure and a bullet payment option where the principal and interest are paid at the end of loan tenure.
