NBFC Gold Loans: A Complete Guide on Gold Loans

The term “NBFC Gold Loans” denotes a secured loan that a person can obtain by pledging or keeping the gold jewellery as Collateral with the NBFC. Further, the term “person” includes both individual and MSME sector.

Earlier, the conventional banks were the only mean of acquiring Gold Loan in India. However, with the passage of time and change in market dynamics, NBFCs have emerged as a new source of finance.

This Blog will talk about the topic “NBFC Gold Loans” and how they have become a prominent finance source.

Concept of NBFC Gold Loans

The term “Gold” signifies both a tangible asset and precious metal for investment. An individual can take loans from both banks and NBFCs by keeping gold jewellery as collateral. However, nowadays, due to the change in market dynamics, there is a considerable shift from bank to NBFCs for obtaining Gold Loans.

The LTV (Loan to Value) ratio for NBFCs is 75% of the Value of Gold Ornaments.

A recent report published by KPMG can prove the same. As per the report, the Indian Gold Market is anticipated to cross Rs 4617 billion by 2022 at a 5 year CAGR (Compound Annual Growth Rate) of 13.4%.

Further, as per this report, both Nidhi Companies and NBFCs forms around 35% of the total Indian Gold Market.

In India, obtaining credit against the gold deposit is a common practice. The funds raised by against the gold can be used for meeting Medical, Business, or Financial needs.

Lastly, the popular NBFC registration is for granting Gold Loans are Muthoot Finance, Manappuram Finance, and IIFL (India Infoline Finance Limited).

Concept of Investment Credit Company

NBFC-ICC or Investment Credit Company is a unique blend of three NBFCs into one. These NBFCs are Loan Company, Investment Company, and Asset Finance Company.

The main aim behind this blend is to offer financial support to the needy and backward section of society in the form of Loans and Advances. This NBFC assists in every activity except for the acquisition of securities. It also aims to ease the operational flexibility of the NBFC Sector.

Further, the Apex Bank has the authority to regulate and administer NBFC-ICC in India.

Reasons for the Growth of NBFC Gold Loans in India

The reasons for the growth of Gold Loans offered by NBFCs are as follows:

1. Speedy Loan Approvals;
2. Minimal Documentation;
3. Multiple Loan Options available with higher LTV (Loan to Value);
4. Greater Accessibility;
5. Assists Customers from Backward Section of Society;
6. Better Operating Cost Mechanism than Banks;
7. Convenient Hours of Business Operations;
8. Flexibility due to Availability of provisions for both Small and Large Loan Amounts;

Eligibility Criteria for Obtaining Gold Loans from NBFCs

The common eligibility criteria for obtaining NBFC Gold Loan in India are as follows:

1. An Indian Citizen;
2. Must be of Age between 18 to 75 years;
3. A Salaried or Self Employed;

Also, Read:NBFC Home Loans

Comparison of NBFC Gold Loans with Banks and Money Lenders

Basis of Comparison	NBFC Gold Loans	Traditional Banks	Money Lenders
Loan To Value (LTV)	Up to 75%	Up to 75% However, as per a notification issued by the RBI on 06.08.2020, the limit has been increased to 90% from 75% till 31.03.2021 due to COVID-19 pandemic. That means the LTV will again be 75% from 01.04.2021.	Less than 75%
Processing Fee	No Processing and Appraisal Fee	No Processing and Appraisal Fee is charged for Small Token Loans. However, both Processing and Appraisal Fee is charged for High Token Loans.	Not Applicable
Rate of Interest	11 to 24% per annum	7 to 15% per annum And 4% per annum for Agricultural Purpose	20 to 25% per annum
Maximum Loan Amount	No specific limit	Rs 3 lakhs for Agricultural Loans	No specific limit
Penetration	High	Low	High
Manner of Disbursal	Cash Payment is allowed up to Rs 20000. Beyond that, the amount is directly transferred to the customer account.	The customer must have a Bank Account with the respective bank to avail of a gold loan.	Cash
Operating Hours	Open beyond the business working hours.	10 am to 5 pm	Open beyond the business working hours.
Regulatory Mechanism	RBI	RBI	No regulatory mechanism
Turnaround Period	5 to 10 minutes	1 Hour	Less than 10 minutes
Repayment Plans	Mostly, monthly interest payments together with the principal amount towards the end of EMI based schemes or end of the tenure.	Mostly, both interest and principal amounts are made in lump sum at the end of the period.	Either Daily Repayments or Monthly Repayments
Customer Grievance	Core Focus	Non-Core Focus	Core Focus

Certain Facts about NBFC Gold Loans

Some of the Important Facts about NBFC Gold Loans are as follows:

1. Some of the schemes of Gold Loan are meant to be sanctioned only by the Southern India Branches. That means the people living in the southern states can only avail of the benefits of these schemes.
2. Failure in the Repayment of the loan will result in the auction of the gold kept as collateral;
3. An individual or MSME can avail of a gold loan facility only against the physical collateral security, including specially minted gold coins with the limit up to 50 grams. That means an NBFC or bank will not provide gold loans against Sovereign Gold Bonds and ETF.
4. A borrower can easily repay his/her due interest or loan amount at any branch office. However, for collecting the deposited gold, he/she needs to visit the branch from where the loan was taken.
5. It shall be relevant to note that only the value of gold will be calculated in jewellery. That means the value of gems or precious metals will not be calculated for determining collateral security.
6. A bank will provide Gold Loan only if the applicant has his/her account in the same. However, the same is not the case with an NBFC.

NBFCs that Provide Gold Loans in India

The NBFCs that provide Gold Loans in India are as follows:

1. Muthoot Finance
2. Manapuram Finance
3. IIFL Gold Loan
4. Bajaj Finance

Comparison Between the NBFCs Providing Gold Loan in India

NBFC	Interest Rates	Processing Fee	Loan Period (months)	Loan Amount
Bajaj Finance	14% to 26%	1.90%	6 to 36 months	Rs 15K to Rs 15Lakh
Manappuram	19% to 26%	1.60%	1 to 24 months	Rs 10K to Rs 1 Crore
Muthoot Finance	12% to 24%	1.85%	3 to 24 months	Rs 15K to Rs 1Crore
IIFL	12% to 14%	1.90%	3 to 24 months	Rs 10K to Rs 15 Lakh

Conclusion

At last, we can say that for borrowers, NBFC Gold Loans have come out as one of the best mode of raising quick, easy, and short-term capital.

Further, if you are still in dilemma or facing any confusion regarding the NBFC Gold Loans, then contact us at Swarit Advisors, we have a team of experts who will provide you with a lucid and a clear understanding of this notion. As our professionals rank high in providing NBFC Registration PAN-India and Advisory Services.

More on NBFCs:NBFC Business Loans: Reasons to Choose Them Over Bank Loans