Gold Loan: Monthly Interest Payment Now Mandatory To Protect Credit Score
Hyderabad, Oct 10 (Maxim News) : With gold prices hitting record highs, banks are facing growing challenges in loan disbursement and recovery.
A significant portion of over 30 percent of gold loan customers are defaulting by failing to repay within the prescribed one-year period, pushing their accounts into Non-Performing Asset (NPA) status.
In response, several banks have introduced stricter repayment conditions. Unlike earlier practices, borrowers must now pay the full monthly interest from the date the loan is sanctioned.
Banks warn that failure to meet these payments will negatively affect a borrower’s credit score, as reported to agencies like CIBIL. Once marked as an NPA, customers will see a drop in their credit rating, making it harder to secure future loans.
Bankers emphasize that these measures are being applied after assessing the customer’s financial profile.
The rising value of gold has fueled a surge in demand for gold loans, which often carry interest rates below 9 percent, significantly lower than personal or unsecured loans. According to recent data, gold-backed loans in India have grown by 26 percent over the past two financial years.
Under Reserve Bank of India (RBI) guidelines, gold loan disbursement is linked to the market value of the pledged gold.
Banks may offer up to 85 percent of the gold’s value for loans up to ₹2.5 lakh, 80 percent for loans up to ₹5 lakh, and 75 percent for loans above that amount. While government banks follow these limits, some private financial companies are reportedly lending beyond them.
A government bank official explained that smaller loans, such as ₹1 lakh—are increasingly popular due to quick processing. Recalling her own experience, Hyderabad resident Sunitha shared that she and her husband Ram pledged four tola gold bangles purchased for ₹1 lakh and received ₹3.5 lakh in just under 90 minutes. (Maxim News)
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