All About Agriculture Gold Loan

Agricultural Loan Amount

The amount that can be availed under agricultural gold loans varies from lender to lender. The amount approved under the loan is based on the purity of the gold jewellery and the repayment capacity of the borrowers. Lenders verify the gold purity. Some lenders are comfortable giving higher quantum of loans, such as up to Rs 25 lakh, depending on the value of the collateral.

Lenders also decide the amount of agriculture gold loans per gram basis or on the loan-to-value basis. Under agriculture loan per gram, a particular amount of loans to be disbursed is decided for each gram of gold that is given as collateral. On loan-to-value, or LTV basis, most lenders give loans of up to 75% of the value of the pledged gold.

Interest Rate

The interest rate on agricultural gold loans starts from 7.00% per annum. Most lenders calculate the interest rate by adding a certain premium over their marginal cost of fund-based lending rates. The rate of interest on an agriculture gold loan also depends on the category of loan, demand loan, regular term loan or overdraft facility.

In the case of an overdraft facility, the eligible amount is deposited into the borrower’s bank account. Borrowers can use the amount as and when needed and the interest is only paid on the used amount.

Most banks do not charge any processing fee if the loan amount is up to Rs 300,000. For higher amount loans, a processing fee ranging from Rs 1,000-2000 is applicable along with the prevailing rate of Goods and Service Tax.

Repayment

The repayment schedule is based on the type of loans. Most banks have a 12-month repayment cycle, from the date of disbursement, for agricultural gold loans. Borrowers can pay part or lump sum payment along with the interest rate within 12 months, which is extended to 18 months by some banks.

For agricultural goal loans taken for the purpose of farming, the repayment is in sync with the harvesting cycle and the cash flow of the borrowers. Term loans can be extended up to three years depending on the activity.

Conclusion

Agriculture gold loans have helped many farmers to expand their activities and also venture into allied activities and not just depend on crop production. Moreover, the interest rate on agriculture loans is attractive and is much lower than those charged by local moneylenders. Borrowers also get a flexible repayment schedule, which helps in focusing on business and managing their cash flows.

Lenders like IIFL Finance have also ensured that such loans are given in a simple and easy manner to farmers and entrepreneurs by explaining to them all the terms and conditions and ensuring that no hidden charges are levied.

IIFL Finance provides gold loans through a fully digital process that can be completed within minutes from anywhere. More importantly, it offers customised loan options to farmers to ensure the funds meet their capital requirements and the disbursement as well as repayment are in line with the sowing and harvesting periods.

FAQs

Q1. What is the maximum agriculture gold loan?
Ans. Agricultural gold loan amounts vary by lender. A lot of factors are taken into consideration sauh as the purity of gold, your ability to repay, and the gold's value itself. Some lenders can offer as high as up to Rs 25 lakh based on collateral value. Typically, loans are capped at 75% of the pledged gold's worth (loan-to-value ratio)

Q2. What is the purpose of gold loan for agriculture?

Ans. The purpose of Agricultural gold loans can be classified into two key areas:

• Crop Production: Funds can be used to cover expenses related to planting, fertilizers, pesticides, irrigation, and other essential aspects of growing crops.
• Allied Activities: This broadens the scope beyond just crops. You can use the loan for expenses in related agricultural activities like dairy farming, fisheries, poultry, beekeeping, and more, as defined by the government and RBI.