From ancient time people of India give a lot of importance to gold. Every Father gives gold ornaments to his daughter at the time of marriage. Every Indian likes to purchase gold ornament and coins at the time of Diwali or any moment he feels himself financially strong. In this way, Demand of Gold is regularly increasing day by day in India.
If you will think the above things seriously then you will get some very meaningful reasons behind these acts. Some of reasons behind the purchase of gold are as follows:
- There is no risk factor present in the investment of gold
- Gold beat the inflation rate and always gives a good return
- You could easily purchase gold from banks/post-offices/Jewellery Shop
Now after understanding the importance of gold for the people of India, various financial institutions offer gold loan facility to attract those customers, who have the gold with them but they have no money to fulfill their requirements either personal or business.
Description of Gold Loan
Loan against Gold Ornaments, designed to provide liquidity against gold ornaments/coins which a customer pledges with the bank and customer do not require to sell their gold ornaments. The loan amount can be utilized for personal / business & any other non-speculative purposes. It is a very quick and easy way of fulfilling one’s financial needs as compared to the other kinds of loans.
Benefits of Gold Loan
- Instant loans available on the gold jewellery you own
- Assured security of gold jewellery
- Loan amount could be 60-80 percent of market value of gold depending upon terms and conditions of different financial institutions.
- Flexible interest rate according to time period and loan amount depending upon terms and conditions of different financial institutions.
Required documents for gold Loan
- Identity Proof(Voters ID Card/Driving Licence etc)
- An Address Proof (Telephone/electricity bill/Ration Card/Sales tax certificate)
- Passport size photographs
Major changes likely in Gold Loan Norms soon
In some days, Reserve Bank of India (RBI) will make public the recommendations of an expert panel headed by K.U.B. Rao that, if accepted, could radically change the way Indian gold loan companies function and treat their customers.
Some of the recommendations of the panel include: making it mandatory for NBFCs to sign loan agreements with borrowers; permitting commercial banks to lend against gold other than jewellery such as bars or bullion; and standardizing criteria to decide lending rates and the value of gold for the purpose of calculating loan-to-value (LTV) ratio.
Many gold loan financiers do not enter into proper loan agreements with the borrower except for offering informal chits known as “pawn tickets”, which are not valid documents in case of a dispute.
“The NBFCs should change their entire range of operations and adopt fair practices in letter and spirit. There is some standardization required in the interest rate structure and the way they decide the value of gold to calculate LTV,” the RBI official said.