Loan on Sovereign Gold Bond – UBI, BOB, PNB & Canara bank
Can we get the loan on Sovereign Gold Bond?
Sovereign Gold Bonds are eligible to be used as collateral for loans from banks, financial institutions, and NBFC i.e. Non-Banking Financial Companies.
However, the Loan to Value ratio will be the same as applicable to ordinary gold loans prescribed by RBI i.e. Reserve Bank of India from time to time.
As per the RBI guidelines, granting a loan on Sovereign Gold Bond(s) would be subject to the decision of the bank or financing agency.
In this article, we are going to discuss “Loan against the SGBs” through the various government banks.
Also Read Loan against Sovereign Gold Bond | SBI | ICICI | HDFC | Interest Rate | Eligibility
Documents Required
Individual
- Application form and loan agreement
- KYC documents such as identity proof, signature proof, and address proof.
- Certificate of the sovereign gold bond.
- For a loan amount greater than Rs 50 Lac, the last two years ITR with computation of income and the last three months’ Bank Statement.
Non-Individual
- Application form and loan agreement.
- KYC documents such as identity proof, signature proof, and address proof.
- Certificate of the sovereign gold bond.
- Audited Balance Sheet, Profit & Loss Account, Bank Statement, and ITR return for the last two years.
Also Read Loan Against Public Provident Fund | New Interest Rate | Eligibility | Process
Eligibility
- A person resident of India – Individual or on behalf of a minor child, or jointly with another individual.
- Trust, HUF, Charitable Institutions, and Universities.
Also Read SBI Loan Against FD : Interest Rate | Features | Benefits | Online | Repayment
Type of Loan
Demand Loan
A demand loan is basically a ready-to-repay loan on demand from lenders.
In a demand loan, the bank can ask for the lent amount to be repaid by the borrower in a relatively shorter duration.
The customer(s) have the liberty to repay the amount anytime without facing any pre-payment charges.
Overdraft
Overdraft is a service, where the customer can withdraw more amount than the available balance.
However, eligibility for a loan depends on the relationship between the bank and the customer along with the customer’s credit score.
Two types of Overdrafts are a Standard overdraft and a secured overdraft.
Also Read Why CIBIL Score is Important? | Check Credit Score | Improve | 2021
Loan on Sovereign Gold Bond through Punjab National Bank
| Quantum Of Finance | Minimum – Rs. 50000/- Maximum – Rs.10.00 lacs |
| Repayment Period | Till the date of maturity i.e Maximum 8 years or residual period of the Gold Bond whichever is earlier. |
| How to Apply? | Offline only |
| Documentation/Upfront Charges | NIL |
| Type of Loan | Demand Loan Overdraft |
| How Much Can I Borrow? | Margin is the difference between the amount of money borrowed and the value of the Sovereign Gold Bond that secures the loan. Margin – Individuals – 25% and Other than individuals – 40% |
Rate Of Interest
RLLR – 6.65% to 6.80% (June 2021)
| Individual | RLLR+1.15% |
| Other than Individual | RLLR+2.15% |
Currently RLLR i.e. Repo Linked Lending Rate is 6.65%. Therefore, The rate of Interest for individuals will be 1 Year 6.65%, + 1.15% = 7.80%(Minimum). However, for other will be 6.65% + 2.15% = 8.8%(Minimum)
Important Points
- Loans will be available against SGBs held in Dematerialised form with the Depository Participant of NSDL only.
- In the case of a demand loan, the disbursement of the loan should be by way of credit in the operative account of the borrower with the Bank.
- Interest will be charged on annual basis and will be serviced as and when levied.
Loan on Sovereign Gold Bond through Union Bank of India
| Quantum Of Finance | Minimum – Rs.50000/- Maximum – Rs.25.00 lakhs |
| Repayment Period | Demand Loan – 12 months Overdraft – 24 months |
| How to Apply? | Offline Only |
| Documentation/Upfront Charges | NIL |
| Type of Loan | Demand Loan Overdraft |
| How Much Can I Borrow? | Margin is the difference between the amount of money borrowed and the value of the Sovereign Gold Bond that secures the loan. Margin – Individuals – 30% and Other than individuals – 40% |
Rate Of Interest
| Demand loan | 1yr EBLR+1.85% |
| Overdraft | EBLR+2.20% |
Currently, EBLR i.e. External Benchmark-based Lending Rate is 6.70%. Therefore the rate of Interest for a demand loan will be 1 Year 6.70%, +1.85% = 8.55%. However, for overdraft will be 6.70% + 2.20% = 8.9%
Important Points
- A loan against a Sovereign Gold bond held in physical form is NOT permitted.
- Appropriate DPN note, Letter of continuity, Letter of general lien and setoff, Agreement for a pledge of Bonds, and any other document stipulated in sanction.
- Interest will be charged on annual basis and will be serviced as and when levied.
- Pledge/Lien on Sovereign Gold bond held in Dematerialized form with any Depository Participants.
Also Read Sovereign Gold Bond SBI | How to Buy SGB Online?
Loan on Sovereign Gold Bond through Bank of Baroda or Canara Bank
Bank of Baroda and Canara Bank do not give the loan against the Sovereign Gold Bond now.
Also Read How to Buy & Sell Sovereign Gold Bond in Zerodha? Gold Bond Taxation | Gold ETF vs Gold Bond