SBI Gold Loan Products — Our Analysis

SBIA gold loan is a quick way to raise funds for short to medium term needs. You can pledge your gold jewellery with a bank or a gold loan company to get a short-term loan. When you repay the loan, you get your jewellery back. Since the gold loan is secured (backed by your jewellery), you can expect the interest rates to be low. However, to be honest, this may not always be the case. I have seen interest rate of a gold loan (especially from gold finance companies) to be much higher than rate for a personal loan. This is a digression from the main topic though.

I have reviewed gold loan products from Axis Bank and Muthoot Finance in my earlier posts. In this post, let’s look at the gold loan products offered by the State Bank of India.

SBI Gold Loan: Eligibility and Important Features

  • You must be 18 years or above.
  • You must have a steady source of income. No income proof required for bank’s employees or pensioners.
  • Minimum loan amount: Rs 20,000.
  • Maximum Loan amount: Rs 20 lacs.
  • You can take loan by pledging your gold ornaments including gold coins sold by banks.
  • Only the gold coins sold by banks can be used to apply for a gold loan. Gold coins purchased from jewellers are not eligible as collateral for the gold loan. Moreover, you can get gold loan for only up to 50 grams of gold coins. Do note these restrictions are not bank specific and have been placed by the Reserve Bank of India. Refer to RBI Master Circular on Loans and Advances for more on this. Moreover, RBI prohibits banks from providing loans against gold ETFs and gold mutual fund units.

Different Types of Gold Loan Products Available

SBI has 3 gold loan products.

Gold loan

  • Interest payment and principal repayment commence from the month following the month of disbursement.
  • Loan Tenure: 36 months.
  • Margin: 25% (LTV of 75%).

Liquid Gold Loan

  • This is an overdraft facility.
  • You need to pay interest on the utilized amount on a monthly basis.
  • You can repay principal amount as per your wish or at the time of closure of the facility.
  • Remember overdraft facility is different from a term loan. Under an overdraft account, you can draw from the loan facility multiple times. Once you repay the principal (part or full), the facility gets to the amount of principal repaid and you can draw that amount again.
  • Facility Tenure: 36 months.
  • Margin: 25% (LTV of 75%).

Bullet Repayment Gold Loan

  • Both interest and principal repayment at the end of loan tenure.
  • Loan Tenure: 12 months. RBI caps tenure of such bullet repayment loans at 12 months.
  • Margin: 35% (LTV of 65%).
SBI Gold Loan ProductsGold LoanLiquid Gold LoanBullet Repayment Gold Loan
Loan TypeTerm LoanOverdraftTerm Loan
Repayment methodPrincipal and interest to be paid every monthMonthly interest on the utilized amountInterest and principal repayment at the end of the loan tenure
Margin Required25%25%35%
Loan Tenure (months)363612

What Is the Rate of Interest for SBI Gold Loan?

Rate of interest for the loan shall be 2% above 1-year MCLR. As on October 28, 2018, 1-year MCLR for SBI is 8.5% p.a. Therefore, the loan interest rate will be 10.5% p.a. Do note that MCLR gets revised every month. However, once you take the loan, your loan interest rate will stay constant for 1 year and will reset at the prevailing rate every 12 months. 

The rate of interest looks quite attractive as compared to gold loans from some of the banks and NBFCs that we have reviewed earlier. 

Processing fee at 0.5% shall be charged subject to a minimum of Rs 500. GST shall be extra. Any charges for the appraisal of gold shall be borne by the applicant.

Points to Note

  1. The SBI website does not make any mention of the purity of gold required.  As per RBI guidelines, gold ornaments and jewellery are valued at average of closing price for the past 30 days as quoted by Indian Bullion and Jewellers Association (IBJA). If the jewellery is than 22 carats gold, such jewellery shall be valued proportionately.
  2. You get loan only for the value of the gold in the jewellery. The studded stones and intricate work in the jewellery do not add to the loan potential of the jewellery.
  3. The loan facility may be available at only select branches of SBI. Personally, I expect the disbursement process to be more cumbersome and slower than pure gold loan companies such as Muthoot and Manappuram Finance.
  4. If you cannot repay the loan, the bank can sell your jewellery to recover the loan. Any excess amount left after settlement of loan will be returned to you.
  5. CIBIL score is not a big concern in case of gold loans. You can get a gold loan even if your CIBIL score is not very good. However, if your CIBIL score is good, you can even apply for a personal loan. With a good CIBIL score and repayment ability, you may get the loan at a similar rate, with less documentation and for a longer tenure too.

Additional Reading

For more information, please visit the SBI Gold Loans page.

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