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What is a Gold Loan for Farmers?

A gold loan for farmers is a speciality loan product offered for farmers against gold. Farmers can get the appropriate loan amount depending on the weight and purity of the gold pledged. This type of loan can also be taken for farming-related activities like fisheries, poultry, dairy, sheep, piggery farming, etc. Entrepreneurs who have agri-based businesses can take this loan to get new farm machinery for land development, horticulture, irrigation, agricultural produce transport, etc.

Features and Benefits of Gold Loan for Farmers

Gold loans are known for providing easy access to quick funds, to those who have gold jewellery. Some of the prominent features and benefits are:

  • Hassle-free loans: As long as you have gold jewellery that can be pledged, you can get gold loans easily by using them as collateral. 

  • Fast processing: For agri-gold loans, proof of income is not needed as it is secured against gold jewels. So, the processing is quick, and the loan amount is transferred to the bank account immediately. 

  • Expert gold valuation: Professional assayers perform gold valuation so that you can get a fair price for the pledged gold. 

  • Competitive interest rates: Compared to other types of loans, such as personal loans, gold loans for farmers have competitive interest rates based on the tenure for which you get the loan. 

  • Loan amount: Depending on the lender, you can get a loan amount varying from ₹50,000 to ₹50 Lakh based on your requirement. 

  • Flexible repayment: Lenders may offer a gold loan that you can repay in terms of EMIs, pay interest monthly and a bullet payment at the end of the tenure, or pay the entire loan (principal + interest) as a bullet payment at the end of the gold loan tenure

  • Safe storage of physical gold: The gold you pledge is kept in an insured vault at the physical location of the bank or NBFC to ensure safety and security. 

Eligibility Criteria for Farmers

Eligibility for gold loan for farmers is simple:

  • Age must be between 21 and 70 years

  • Any farmer who cultivates crops or engages in farming-related activities

  • Agri entrepreneurs

  • Tenant farmers, sharecroppers, and oral lessees

  • Having gold ornaments, jewels, or articles that meet the requirements of the lender

Documents Required for Getting a Gold Loan

Some of the common documents required are:

  • Photographs of the borrower

  • Filled in gold loan application form

  • KYC documents such as Aadhaar card, PAN card, etc. 

  • Proof of holding agricultural land or performing allied activities

How to Apply for a Gold Loan for Farmers

To get a gold loan for farming and related activities, you can apply online on Bajaj Markets :

  1. Use the gold loan eligibility calculator on the website to find out the maximum loan amount you can get for the gold you have. 

  2. Enter your personal details along with your mobile number in the application form.

  3. Depending on the lender, you may get a call back from a bank representative.

  4. For gold loans, a representative may ask you to visit a nearby branch of the bank or NBFC for gold valuation. 

  5. After evaluating the gold and ensuring that it meets the lender standards, the loan is disbursed to your bank account. 

Gold Loan Interest Rates and Charges for Farmers

Financial institutions offer gold loans at competitive interest rates compared to other types of loans, especially for farmers. The loan is secured against the pledged gold, so the interest rates are lower than those of unsecured loans like personal loans. 

 

Most banks offer agri-gold loans based on one year MCLR. Some lenders offer interest rates varying from 8.88% to 11.88% per annum. Processing fee also varies with lenders. You may also have to pay appraisal charges depending on the loan provider. 

Uses of Gold Loan in Agriculture

​Gold loans offer farmers a practical financing solution by allowing them to pledge gold assets for immediate funds. These loans can be utilised across various agricultural activities, including:​

Buying Seeds and Fertilizers

Access to quality seeds and fertilisers is crucial for crop production. Gold loans provide the necessary capital for farmers to purchase these inputs, enhancing crop yields and overall productivity. ​

Investing in Farming Equipment

Modern farming equipment increases efficiency and reduces labour costs. Farmers can use gold loans to invest in machinery such as tractors and irrigation systems, leading to improved farm operations. ​

Covering Operational Costs

Day-to-day expenses like labour wages, utility bills, and transportation are integral to farming operations. Gold loans offer a financial buffer to manage these recurring costs, ensuring smooth agricultural activities. ​

Managing Seasonal Cash Flow

Agricultural income is often seasonal, leading to cash flow challenges during off-peak periods. Gold loans help farmers bridge these financial gaps, maintaining operations until the next harvest.

Government Schemes and Subsidies on Gold Loans for Farmers

The government offers multiple schemes and subsidies to support farmers in accessing affordable credit. These help improve agricultural productivity and ensure financial inclusion. 

Kisan Credit Card Scheme (KCC)

Under this scheme, farmers can access institutional credit for cultivation, post-harvest activities, household consumption, working capital, and farming allied activities. With interest subvention, farmers get a 2% subvention from the rate of interest offered by the lender. They also get an additional 3% for prompt repayment within one year. This effectively reduces the total interest on the loan. Using a credit card with a Personal Identification Number (PIN) and an International Identification Number (IIN), farmers can access loans of up to ₹5 Lakh at a subsidised interest rate of 7%. 

Modified Interest Subvention Scheme (MISS)

With this scheme, farmers can get agri loans at a 7% interest rate for a maximum loan amount of ₹3,00,000. If the loan is repaid on time, they can get a 3% interest subsidy, which reduces the interest rate to 4%. Many banks offer interest subvention for gold agri loans. 

Frequently Asked Questions

What is a gold loan for farmers?

A gold loan for farmers is a secured loan where agriculturalists pledge their gold ornaments as collateral to obtain funds for farming-related expenses. The loan amount is determined based on the gold's purity and weight.

How can farmers use a gold loan for farming purposes?

Farmers can utilise gold loans to finance various agricultural needs, including purchasing seeds, fertilisers, and equipment and covering other cultivation expenses. These loans provide quick liquidity, enabling timely investment in farming activities.

What are the eligibility criteria for farmers to avail of a gold loan?

Eligibility criteria may vary by lender, but generally include:​

  • Age: Applicants should be between 21 and 70 years old.​

  • Occupation: Individuals engaged in agriculture or allied activities.​

  • Gold Quality: Gold ornaments pledged should meet the lender's purity standards, typically 18 to 22 karats.​

What documents are required to apply for a gold loan for farmers?

Commonly required documents include:​

  • Proof of Identity: Aadhaar card, Voter ID, or Passport.​

  • Proof of Address: Utility bills, Aadhaar card, or Rental agreement.​

  • Proof of Agricultural Activity: Documents like land ownership records or lease agreements.​

What is the interest rate on gold loans for farmers?

Interest rates for agricultural gold loans are generally lower than standard gold loans. For instance, Bajaj Finserv offers 9.50% per annum for gold loan.

How can farmers apply for a gold loan online?

Farmers can apply for gold loans online by visiting the official websites of banks or financial institutions offering such services. The process typically involves filling out an application form, uploading necessary documents, and scheduling a visit for a gold appraisal. ​

What is the repayment tenure for a gold loan in farming?

Repayment tenures for agricultural gold loans vary by lender but often range from 6 to 12 months. Some institutions may offer flexible repayment options to align with crop cycles and farmers' cash flows. ​

Can small and marginal farmers get a gold loan?

Yes, small and marginal farmers can avail of gold loans, provided they meet the lender's eligibility criteria, including age and gold purity requirements. These loans can help address immediate financial needs related to agriculture. ​

What happens if a farmer is unable to repay the gold loan?

If a farmer fails to repay the gold loan:​

  • Penalties: The lender may impose penalty charges on the overdue amount.​

  • Auction of Gold: After giving prior notice, the lender has the right to auction the pledged gold to recover the outstanding dues.​

  • Credit Score Impact: Non-repayment can negatively affect the borrower's credit score, impacting future loan eligibility.​
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