The State Bank of India (SBI) can offer Rs. 20,000 to Rs. 20 lakhs as gold loan. Customers can pledge gold jewellery or coins (bank-purchased) to avail this credit facility. The bank has benefits such as minimum paperwork and low rate of interest for a loan against gold. Any person, who is 21 years of age and above, can apply for the loan. The gold loan interest rate in SBI has seen a rise and fall past a few years due a variety of reasons.
Change of Interest Rates for Gold Loan by SBI
Recently, the bank with other financial institutions lowered the rate of interest to 8.45% in Southern India because of the Kerala floods 2018. This was specifically for loans against gold taken for agriculture and home repair. The bank also did away with the processing fee. The gold loan rate of interest SBI is 2% above the marginal cost of funds as per the lending rate (MCLR) of a year.
At present, the rate is 7.95%, while the effective rate per year is 9.95%, as provided on the website of the bank. The gold appraiser charges have to be paid by the borrower. The repayment of interest and principal commences from the month after that of the disbursement. Maximum tenure is 36 months. According to the RBI guidelines, SBI keeps a margin of 25 percent of the gold’s value while deciding the loan amount.
Depending on the gold rate in the global market and in India, the interest rate keeps on fluctuation but there is no dramatic change seen over a period. Processing fee is usually 0.50 percent of the loan amount. Goods and Services Tax is applicable separately. The applicant, who has steady flow of income, can apply singly or jointly for the funds. Bank employees, pensioners, salaried, self-employed etc can be permitted to apply for the SBI gold loan in India.
What Factors Influence the State Bank Gold Loan Interest Rates
Below given are factors that impact State Bank of India gold loan interest rate.
- Loan Amount: If the loan amount is huge, the rate of interest would be lower and vice-versa. For higher loan amount, a credit check will be essential. As per credit score, an interest rate will be decided. For a standard loan amount, credit history is not reviewed.
- Gold Asset: The State Bank accepts gold jewellery and bank-purchase coins. There is no need to produce the bill of the asset until and unless the bank asks for it. Other gold asset like accessories, biscuits, etc is not accepted. Depending on the net weight of the gold content in the asset, its purity (18 carat to 24 carat), the loan rate will be decided.
- Tenure: The tenure of a loan against gold will influence the cost of the loan and interest rate. Longer tenure pay mean shelling out of greater interest amount, and otherwise. Interest rate may be higher for short-tenures, but unlike other loans, gold loans do not face a steep hike in interest rates.
- Relationship with the Bank: If the borrower has retained a healthy relationship with SBI in terms of bank accounts, deposits, previous repaid loans etc, then there are greater chances of getting discounts on the rate of interest. Women and agriculturists also stand a chance of getting such discounts.
- RBI Repo Rate: The RBI can raise or lower the repo rate by a few points now and then depending on several factors. If these rates change, the impact will reflect in the gold loan interest rates as well.
If an individual is looking to apply for SBI loan against gold then do check out the updated rate of interest as that will determine the total cost of the loan he/she has to bear.