Gold Loan Disbursement Process: What to Expect

The Indian gold loan market has experienced significant growth, with its value reaching approximately ₹7.1 lakh crore in 2024. This expansion is largely attributed to the increasing demand for quick and accessible credit options, especially among individuals seeking to leverage their gold assets.

In the first half of FY25, banks reported a 43.4% rise in gold loan disbursements, underscoring the growing reliance on gold-backed financing. Despite this surge, the gold loan market's penetration remains at 5.6% of the total household gold, indicating substantial room for growth.

Understanding the gold loan disbursement process could be helpful for potential borrowers to navigate this financial avenue effectively. This blog provides a comprehensive, step-by-step guide to the gold loan disbursement process, empowering you to make informed decisions and efficiently access funds when needed.

Understanding Gold Loans 

Before we delve into the disbursement process, let's take a moment to understand what a gold loan actually is. A gold loan is a secured loan where you pledge your gold jewellery or coins as collateral. The bank evaluates the value of the gold and disburses a loan amount based on that valuation. These loans typically have lower interest rates compared to other forms of loans, like personal loans, making them an attractive option for those in need of quick funds. 

Gold Loan Disbursement Process 

The process of obtaining a loan against gold jewellery is relatively simple compared to other forms of loans. Let's break it down step by step: 

1. Application Process

To apply for a loan against gold, you need to specify the desired tenure and the amount required. The application can be done online; however, borrowers are required to visit the bank's facility to submit the physical gold. The processing fees for gold loans are minimal, starting from 0.1%, making it a cost-effective option compared to personal loans. 

2. Verification by the Bank

Once you submit your application and documents, the bank will verify your identity and perform a purity check on your gold to ascertain its market value. This step ensures that both parties are aware of the value of the collateral. 

3. Gold Valuation 

The bank will evaluate the purity and weight of your gold ornaments or coins to determine its market value. The loan amount disbursed is typically up to 75% of the gold's value. For example, if your gold is valued at ₹10 lakh, you can expect a loan amount of up to ₹7.5 lakh. 

4. Loan Approval and Disbursal

After verifying the documentation and gold valuation, the loan is processed and approved. The disbursal of loans against gold is incredibly fast, with eligible borrowers receiving instant approval and disbursement within minutes. The approval process for a gold loan does not heavily rely on factors like income or credit score, making it accessible to a wide range of individuals. 

5. Storage and Insurance 

Once the loan is approved, your gold is securely stored in a facility designated by the bank. The government mandates the secure storage of gold, and additional insurance cover is provided to protect against any unforeseen events such as theft. This insurance cover also ensures that your loan will be repaid in case of your unfortunate demise, relieving your family from any financial burden.