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RBI monetary policy: Here’s how a 4th rate hike will impact gold loans


RBI is set to announce bi-monthly monetary policy outcomes on September 30. Expectations of a fourth rate hike have taken rounds in the range of 35-50 basis points. Generally, when RBI hikes the repo rate the cost of borrowing for financial services providers also rises. To pass on the impact of higher borrowing costs, banks, NBFCs, and others usually hike their term loan rates. Since May, these financial institutions have increased benchmark lending rates tracking the repo rate hike trends. If another rate hike is on the table by RBI then it is likely to have a cascading impact on gold loans.

In the past three policies, RBI has hiked the repo rate by 140 basis points or 1.4%. Currently, the policy repo rate is at 5.4%. India’s CPI inflation jumped to 7% in August compared to 6.71% in July this year due to high food prices. Inflation stays above RBI’s upper tolerance limit for eight consecutive months.

For the upcoming policy, Jyoti Prakash Gadia, Managing Director, Resurgent India said, “The sticky inflation, consistently above the benchmark rate in the last three months, along with non-abating food price rise will force RBI to have a hawkish view and a 50 basis point rise in repo rate is expected in the next policy review by RBI.”

“The inflationary trends are expected to continue and we have the supply side constraints too, in addition to the rising prices and interest rates across the globe. The world economy is heading towards recession, which will adversely impact the growth prospects of India also and this may lead to a review of the growth projections by RBI too,” Resurgent MD added.

Further, Gadia said, “With the RBI hands being virtually tied in the current interest rising regime, no surprises are expected from RBI at this stage and it shall work towards taming inflation. The onus shall lie on the Government to continue its efforts to boost investment with suitable fiscal measures and reforms, for ensuring a firm revival and growth trajectory. On the liquidity front, RBI may work towards Stop taking further steps of absorption of liquidity, given the current upsurge in short term rates.”

On gold loans, Umesh Mohanan, Executive Director and CEO, of Indel Money said, “The repo rate hike always has a cascading impact on the borrowing cost. As gold loan has emerged as an alternative source of capital for small businesses and entrepreneurs, the challenge for the NBFCs will be to assess the extent of margin compression so that the customers don’t feel the heat of rate hike.”

Check the latest gold loan rates of NBFC and banks:

Bajaj Finserv:

As per the website, Bajaj Finserv levies interest rates ranging from 10-28% per annum on gold loans. There is a processing fee of 75 of the loan amount.

On the website, Bajaj Finserv said, when the inflation rate is high in an economy, the value of currency depreciates, and most individuals rush to invest in gold. Gold acts as a hedge against inflation, especially when it continues for a prolonged period. During such times, the price of gold increases, and individuals can usually get a low-interest rate on their gold loans.

Manappuram Finance:

On gold loans, the company’s base rate of interest is 14%. However, depending upon how high LTV is, additional interest (amounting to risk premium) ranging from 3-12% is charged over and above the base rate. The interest rate is fixed and calculated on a reducing balance basis. Gold loan products usually have a tenure of three months. The maximum interest rate chargeable during the loan tenure is fixed at 29% per annum.

IIFL Finance:

Here, interest rates on gold loans may range between 12%-27% per annum.

According to IIFL’s website, two main factors affect the calculation of gold loan interest rates. Firstly, the gold loan amount you want to borrow is the primary factor in calculating the rate of interest of the gold loan. The higher the loan amount, the higher the overall interest rate. Secondly, the loan tenure specifies the period of your monthly loan repayment obligations. The higher the loan tenure, the lower the interest rate.

Muthoot Fincorp:

For its RestartIndia Pradhan Gold loan scheme, the NBFC offers a 9.95% interest rate on a minimum loan amount of 5 lakh. Under the Easy Pro scheme, the gold loan interest rate starts from 18% per annum, while the rate starts from 21% and 23% per annum on Easy Max and Super Value Gold Loan schemes, as per the website.

Muthoot Finance:

Here, the interest rate ranges from minimum 12% to maximum 27% depending upon regions in India.


SBI levies an 8% interest rate per annum on SBI Realty Gold Loan and SBI Personal Gold Loan scheme. SBI Gold Loan can be availed by a pledge of gold ornaments including gold coins sold by Banks with minimum paperwork and low-interest rate.

The interest rate is 0.30% above the MCLR-1 year. The minimum amount for a gold loan can be 20,000 and the maximum up to 50 lakh.

HDFC Bank:

The bank’s gold loan interest rates range from a minimum of 7.60% to a maximum of 16.81%. The average interest rate is 10.60%.

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