Gold Loan

What are the New Norms for a Gold Loan?


Gold is no longer just a luxury item owned by a select few socioeconomic classes. It is currently one of the most highly prized commodities, and due to its rising costs, it is one of the most highly traded commodities. Gold has aesthetic, economic, and cultural importance. Indians consume it in many ways, such as through gold bars, jewelry, and coins.

Usually, there has been an increase in research about gold loans. Also, the number of people looking to sell their gold jewelry for cash in times of need is increasing.

Apart from all other basic information about gold loans, you must be aware of the new rules and regulations about gold loans that exist in the economy.

How Easy is it to Access Gold Loans?

To access various gold loan facilities, you must first find a gold investment company that is locally based. You can find out if one in your area is licensed to provide this service.

The only thing that you’ll need to do after this is read their website. Most of these companies will have a website, and the websites are not just for show. These websites contain plenty of helpful information about how gold loans work and what needs to be done by the borrower if they want to use them.

On the website of a gold loan company in your state, you may notice that a significant emphasis is put on how the money is received in exchange for your gold. 

Some companies allow their borrowers to invest with this money, while others do not. But remember, if they allow it, they may charge an additional fee of 10% of the amount borrowed to be deposited into another account. 

If you locate a local gold loan company that allows you to make investments, you can use your funds to invest wisely in them.

What is a Gold Loan?

The gold loan works like a pawn shop with some key differences. Your gold is stored in their vault, and you are given a receipt for it and told how much you could borrow against your gold’s value. The money received in exchange for gold can be used for any purpose; however, it costs an extra fee if you want to use it for an investment opportunity. 

This fee is not to exceed 10% of your original amount. The borrower will receive the principal amount but no additional funds. Borrowers seeking to meet their immediate or long-term monetary demands may apply for a gold loan or a loan against gold, a secured loan. The borrower is offering up their gold jewelry as security in this instance.

Typically, a proportion of the value of the gold pledged is used to determine the loan amount, up to 75%. You must repay the loan in installments. You will receive your gold back once you have paid the loan and interest.

Affordable gold loans are available from nationalized banks, commercial banks, and NBFCs. Your gold loan may have an annual interest rate between 7% and 29%. It, however, differs from lender to lender. 

A gold loan is also helpful to cover a short-term credit need. It could be paying for your child’s schooling, a medical emergency, a family wedding, etc. It is usually better to take a gold loan than to sell your jewelry.

Further, EMIs are a payment option for gold loans. Even better, you can pay the interest in full upfront and repay the loan’s principal at the end of the term.

New Gold Loan Norms Introduced by the RBI

The Reserve Bank of India (RBI) recently changed the gold loan regulations. It has made it easier for lenders to offer more money as a loan against jewelry with easy returns in the form of gold. 

  • The RBI raised the loan-to-value ratio through its regulatory statement in August 2020. It ranges from 75% to a maximum of 90%.
  • According to the RBI’s rules for gold loans, lenders, including banks and non-banking financial institutions, are permitted to give up to 90% of the gold jewelry’s value.  
  • It strictly demands that the loan against gold jewelry be used for non-agricultural purposes. 
  • For borrowers who find it challenging to repay personal or company loans, the modification in the loan-to-value ratio for gold loans is a blessing. The LTV value was changed, allowing borrowers to borrow more money against the same amount of gold. 
  • Banks were permitted to import gold or participate in the gold monetization scheme. They could offer gold loans to jewelry exporters and manufacturers, with the repayment of these loans being made in Indian rupees. 
  • However, the RBI has since announced the new norms after the current notification. According to a recent RBI statement, physical gold can now be used to pay back gold (metal) loans. It is being hailed as a significant breakthrough, particularly in business and bullion.
  • The move is anticipated to aid in promoting Indian refined gold. Plus, assist jewelers in covering their debts with gold holdings. Only prospective borrowers will have access to this option. As per RBI regulations, the loan agreement must expressly state that the borrower can use it. Also, it must specify the standard of gold that is needed.
  • The refiner has to pay back the bank with Indian gold delivery standard metal that was made locally.

What Are the Gold Loan NPA Norms in India? 

NPA norms for gold loans in India are a document that lays down norms and practices followed by the National Personal Asset Authority. It guides the industry in deciding how to value gold and other financial assets. Hence, they do not just operate as an authority but also work with their peers across the globe. 

Gold is an asset to many individuals because of religious beliefs, cultural and social reasons, and many more. Some people consider gold a good investment instrument due to its fluctuating prices. Usually, buyers wish to have gold as an investment or hedge against adverse market events. 

Gold is sometimes considered an instrument of value preservation or a currency. It does not have a fixed nominal value and is traded at its market price. Hence, the idea of gold loan NPA norms is to fix the value of gold.


With so many benefits, a gold loan is among the finest ways to handle any unforeseen financial circumstances. The fact that you must mortgage your gold to the lender is the sole drawback of a gold loan. Therefore, close the loan properly and make the repayments on schedule. 

Additionally, there are several new norms for gold loans that we have stated above. You must know this before applying for a gold loan. So, go through that.

Further, you may check out Piramal Finance to learn more about gold loans and explore their products and services.