Gold Loan Schemes can be categorized based on the purpose of lending. Banks usually offer lower rate of interest for agricultural gold loans which are offered to farmers and people engaged in agriculture for meeting their farming expenses.

• Agricultural Gold Loans: These are loans extended to farmers and agriculturists against gold ornaments to provide them finance for crop production expenses and investment purpose in agriculture or allied agricultural activities. Key Features of such loans are:
  • Evidence of farming activity in form of proof land records is required
  • Written undertaking by the borrower on the purpose for which he intends to use the loan is required. Banks may also monitor the end use of such loans
  • Loans extended for agriculture are categorized under priority sector lending and are eligible for interest subvention scheme from government, which reduces the interest cost to the borrower
  • These loans are allowed generally for a maximum period of 3 years
  • Some banks also offer the option of overdraft facility on such loans
  • Interest Rate on agricultural gold loans ranges from 8.00 to 10.00 %
• Non Agricultural Gold Loans: Loans extended to all other categories of borrowers excluding farmers and agriculturists are known as non agricultural gold loans. These loans are available to all individuals including salaried, self employed professionals, businessmen, women, females, housewives, students, retired officials who own gold and want to pledge the same to get loan. The features on non agricultural gold loans have been explained under the loan schemes by repayment options.
• Bullet Repayment: This is one of the most popular repayment option offered by banks and NBFCs, where the entire principal amount is repaid at the end of the tenure. This repayment option is more prevalent for shorter tenure jewel loans of less than 6 months, as this allows the borrower to utilize all borrowed funds for the required purpose and hence, save them from the burden of repaying principal every year. Key Features of such schemes are:
  • Loan amount is repaid at the end of the tenure
  • Interest is calculated on a monthly basis, with an option to pay interest only EMIs every month, where you pay monthly interest in the form of EMIs
  • Some banks allow a lower LTV of 65% on such schemes compared to maximum LTV of 90% on other loan schemes.
• EMI Scheme: Though not very popular earlier, this scheme is increasingly being offered to jewel loan borrowers. Borrowers are required to pay monthly instalments or monthly EMIs to banks. This scheme is especially popular for longer tenure gold loan schemes with greater loan amounts. Key Features of such schemes are:
  • Lowest EMI for a ₹ 1 Lakh loan is ₹ 2,531 at the lowest gold loan interest rate of 9.90% and maximum tenure of 4 years.
  • Attractive LTVs of upto 90%
  • Banks call for 6 months PDCs for EMIs. Some banks exempt the borrowers from PDC requirement for larger ticket size loans
• Overdraft Scheme: This scheme is especially designed for businessmen and self employed who have fluctuating requirements for funds. The overdraft scheme allows the borrowers to withdraw any fund requirements or deposit any surplus in an overdraft requirements within a pre approved credit limit. Interest is charged only on the utilized portion at any given point of time. Key Feature of such schemes are:
  • Has an overdraft facility that allows deposit and withdrawal of funds during loan tenure
  • Interest expenses are minimized as it allows the borrower to deposit funds in the account when he has surplus funds
  • Available on all ticket sizes, though will be more suitable for relatively larger ticket size loans
  • Also comes with an option to renew the limit at the end of the tenure by paying processing fees