Sovereign Gold Bonds (SGBs) are popular for offering 2.5% annual interest + gold price appreciation. But few investors know that banks and NBFCs also accept SGBs as collateral for loans.
If you need short-term liquidity without selling your bonds, a loan against SGBs may be a smart option.
How Loan Against SGB Works
- You pledge your SGB holdings with a bank or NBFC.
- The lender grants a loan based on the market value of gold represented by the SGBs.
- You continue to earn 2.5% interest on SGBs during the loan period.
- Once the loan is repaid, SGBs are released back to you.
Loan-to-Value (LTV) Rules for SGB
| Parameter | Details |
|---|---|
| Eligible Security | Sovereign Gold Bonds (RBI issued) |
| Loan-to-Value (LTV) | Up to 75% of gold value (as per RBI norms) |
| Loan Tenure | 1 – 3 years (varies by bank/NBFC) |
| Interest Rate | 8% – 12% (lower than typical gold loans) |
| Collateral Release | After repayment of principal + interest |
Example: If your SGBs are worth ₹10 lakh, you can get a loan of up to ₹7.5 lakh.
Loan Against SGB — Quick Guide
Understand the benefits and watch-outs before you pledge your Sovereign Gold Bonds
Why It Works
- Keep your SGBs invested Get liquidity without selling your gold bonds.
- Lower borrowing cost Generally cheaper than traditional gold loans.
- Earn 2.5% while pledged SGB interest continues during the loan tenure.
- Digital, no purity worries Backed by RBI; no storage or quality risk.
What You Should Know
- LTV capped at ~75% Loan sanctioned against a portion of gold value only.
- Gold price risk Falling prices can trigger top-ups or tighter limits.
- Availability varies Offered by select banks and NBFCs only.
- Shorter tenures Loan periods are usually 1–3 years, not SGB maturity.
eBharat.com
When Should You Use Loan Against SGB?
- Short-term cash needs without liquidating investments.
- Business owners needing working capital.
- Investors who expect gold prices to rise but need liquidity.
Get a Loan Against Your SGBs
Apply for a loan against Sovereign Gold Bonds with HDFC Bank, ICICI Bank, or top NBFCs. Track LTV and returns with eBharat Tools.
Related Reads
