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Whats a gold loan all about?

If you need funds for the purpose like medical expenses or any other contingencies, various banks are providing gold loans to meet your expenses.

Eligibility for Deposit

Individuals, Hindu Undivided Families, Trusts and Companies are eligible to subscribe to the Gold Deposit Scheme (GDS). All these however, need to have a Resident Indian status as per the prevailing tax laws.


A deposit under the scheme can be made for a period of 3,4,5, 6 or 7 years.

Rate of Interest

Interest rates are revised by the bank periodically. As per the last notification issued by the bank the applicable interest rates for different tenures were as follows

Years       Rate
3             3.00%
4             3.25%
5             3.50%
6             3.75%
7             4.00%

Gold Rupee Conversion Rate

Valuation of Gold-Rupee conversion rate for payment of interest and repayment on maturity/premature withdrawal will be based on the following conversion factors for the respective day.

(a) London AM fixing for Gold -US $ rate. In case, it is not a business day in London, the previous London AM fixing rate will be taken into account for this purpose.
(b) Rupee-Dollar reference rate announced by RBI.
(c) The prevalent custom duty for import of gold will be added to the value arrived at through (a) and (b) to arrive at the value of gold.

Interest is paid in rupees only.
A depositor has the option of taking interest annually or letting it compound on an annual basis. In the second case interest will be paid at the time of maturity.
Payment of interest will be made in terms of rupee equivalent to the price of gold on the day interest is due.

Deposit procedure

Some of the important points associated with the actual deposit procedure are -

Issue of Receipt


Repayment of the deposit is done in the form of both cash and gold.
If the depositor wants repayment in rupees, the gold-rupee conversion rate for the date of maturity will be considered.
In case of redemption in the form of gold, the bank will hand over to the depositor gold of 995/999 fineness in multiples of 10 grams/TT bars. Adjustment is made in the weight mentioned in the final receipt in case redemption is made in 995 bars instead of 999 bars. However, quantity in excess of multiples of 10 grams is paid in rupees only.
The depositor has the option of renewing the deposit on the date of maturity at the then prevailing interest rates.

Premature Payment

No premature withdrawal is permitted in the first year of deposit.
The bank in the case of premature payment levies a penalty. The amount of penalty varies with deposit period and the date of premature encashment.
If the depositor wants premature withdrawal in rupees, the gold-rupee conversion rate for the date of premature withdrawal will be considered.


Only the Gold Deposit Certificate is transferable and not the statement of account of account / passbook.
The transfer needs to be registered with the agency / branch prescribed by the bank.
No transfer is permitted during the 30 days preceding the date on which interest is due and in the last 90 days preceding the date of maturity.
Statement of Account / Passbook can be converted to a Gold Deposit Certificate on the payment of the prescribed fee

Tax Treatment

Interest earned under the scheme is exempt from Income Tax.
The value of assets deposited is also exempt from Wealth Tax.
Deposit is exempt from capital gains made through trading or redemption.

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