According to a Kotak Institutional Equities report cited by Mint, the value of household gold is nearing $5 trillion, comprising an impressive 65% of the non-property wealth in India. Indian households hold an average of 25,000-30,000 tonnes of gold, when divided across 24 crore census households, is around 100-150 grams per household. At current prices, this is worth ₹15-20 lakh per household, as per Sachin Sawrikar, Founder and Managing Partner of Artha Bharat Investment.
As reported by Mint, gold loan involves pledging gold items (coins, jewellery, bars) as collateral to avail credit from banks, NBFCs, or private finance companies. The lender values the gold as per market rate and approves a maximum limit based on valuation. The borrower receives the entire eligible amount as a lump sum upfront and must repay the loan through pre-determined installments. In case of non-repayment, the pledged gold is sold by the lender to cover the outstanding amount.
According to Mint, gold overdraft functions similar to a credit card or bank overdraft, where borrowers receive a revolving line of credit based on gold asset value. For loans over ₹5 lakh, the facility is typically capped at 75% of the value of gold assets. Unlike gold loans, gold overdraft allows flexible withdrawal of funds as needed, with interest charged only on the amount actually used and for the duration it is used. As noted by Gibin John, Senior Investment Strategist at Geojit Investments Limited, this makes gold overdraft more suitable for those not requiring lump-sum amounts.
As reported by Mint, gold loan rates from major banks currently range from 8.75-9.30% per annum, while gold overdraft rates are broadly similar though overdraft facilities may carry slightly higher upfront processing charges. According to Sawrikar, the decisive advantage of gold overdraft lies in interest computation - for a term gold loan under ₹5 lakh, interest accrues on the full amount from day one, while under gold overdraft with the same limit, a borrower drawing only ₹2 lakh for three months pays interest only on ₹2 lakh for that period, materially lower total outgo for variable needs.
According to recent industry reports, gold loan origination systems are transforming the lending landscape with advanced digital features. Key capabilities include digital onboarding with KYC automation, integrated gold appraisal and valuation workflows, real-time pledge-to-disbursal processing, and vault and collateral management integration. These systems enable real-time eligibility checks, automated loan-to-value calculations, and straight-through processing to significantly reduce turnaround times and improve customer conversion rates. The systems are particularly valuable for banks, NBFCs, and financial institutions operating across multiple branches or handling high volumes, where speed, consistency, and risk control are critical for scaling operations efficiently.
