Only 18 to 22 carat gold ornaments can be delivered and only bank minted coins (24 carats) weighing up to 50 grams per customer. Yes, you can apply for a gold loan against gold coins. A maximum limit of 50g per customer will apply. Lenders check the purity of gold.
Then, the market value of your gold ornaments is calculated according to the market rate of gold on the day of the loan application. It can take up to 90 percent of the value of the gold pledged. If you promise gold ornaments, only portions of gold are used to calculate the value; the lender excludes other metals, stones and gems from the calculations. When you repay the loan and want your gold back, you will receive it in exactly the same state you gave it in.
And that's why the government's gold monetization bill could make many retail investors happy. The only disadvantage of a gold loan is that if you do not repay the amount within the stipulated period, the lender can auction the pledged jewelry to recover the loan amount. Therefore, those looking to raise funds to meet urgent financial needs in the face of the cash crisis caused by the COVID-19 pandemic are now borrowing higher sums through gold lending. As mentioned above, banks (even state-owned ones) and NBFCs offer easy gold lending; in fact, there are NBFCs that only offer gold loans.
You will need Aadhaar or PAN as proof of identity, electricity bill or telephone as proof of address and your photographs when applying for a gold loan. The biggest advantage is that the loan is processed within an hour, since gold is very liquid, which is useful in an emergency. In addition, what matters will be the amount of gold that one can declare without being examined by the income tax department, something important for many who may have family gold or have accumulated over the years. Gold has had the worst performance, with a three percent return, among all asset classes in the past year.
For example, public sector banks, such as the State Bank of India and Canara Bank, charge annual interest of 7.50 percent and 7.65 percent, respectively, on gold loans. In fact, banks and NBFCs approve gold loans and disburse the amount on the same day, in some cases within one hour, provided they are satisfied with your credit profile and the purity of the gold you are pledging. Consequently, the bank has proposed to restrict the possibility of advances against the security of gold coins per customer to gold coins weighing up to 50 grams. Your gold is absolutely safe with them, as it is kept in a vault in a vault with security measures, ensuring the safety of your valuable possession.
On the contrary, the gold loan has very moderate, sometimes even competitive rates, since it is a type of secured loan, which usually has comparatively low interest rates.