1. Types of gold accepted by banks
Most banks only accept gold jewelery and the purity of the gold should remain between 18k and 22k. It is important to note that lenders do not accept gold bullion or bullion as collateral.
2. Maximum Loan Value
A large number of banks offer gold loans for a maximum loan-to-value (LTV) ratio of 75% of current gold market prices. The reason for the high LTV ratio is fixed to improve the borrowing capacity of the citizens to meet their financial emergencies. According to the official website of RBI, according to the existing guidelines, loans sanctioned by banks against the pledge of gold jewelry or ornaments should not exceed 75% of the value of the gold jewelry or ornaments. For example, if you decide to mortgage gold worth Rs 100,000, the maximum loan amount you can get is Rs 75,000.
3. Gold Valuation and Loan Sanction
It is important to determine how the gold loan works. You must be aware of the evaluation and sanction procedure. The bank will assess the gold pledged as collateral, after which it will decide the maximum loan amount you can receive and the interest rate that will be applied. You have the right as a borrower to choose the repayment term of the loan which can range from 6 months to 24 months.
4. Best rates offered by major banks in India
Bank of Maharashtra: It offers an interest rate of 7% and the processing fee will be Rs 500 to Rs 2000 including tax.
Canara Bank: The bank is currently offering an interest rate of 7.35% and the processing fee is Rs 500 to Rs 5000.
Union Bank: The leading bank offers you an interest rate of 7.25% to 8.25%. There is no information available regarding his processing fees.
Bank of Punjab and Sindh: The bank offers an interest rate ranging from 7% to 7.50% with processing fees ranging from Rs 500 to a maximum of Rs 10,000.
GNP: It offers an interest rate of 7% to 7.50% on gold loans.
SBI Bank: It offers an interest rate of 7.30% pa with a loan amount up to Rs 50 lakh for a term of 3 years. The processing fee is 0.50% of the loan amount with GST subject to a minimum of Rs 500.