Banks won't let you miss gold glitter

It goes without saying that gold jewellery assumes special significance in matrimony, irrespective of whether it is a north Indian wedding or a south Indian one.

With gold prices spiralling above the Rs 7,500 for 10 grams mark over the last six months, it must have been difficult for parents planning their son's or daughter's wedding this season.

Most banks such as HDFC Bank and ICICI Bank offer personal loans, which customers can avail of to buy gold jewellery.

However, the interest rate charged on personal loans is very high, ranging from 12 per cent to as high as 17 per cent, depending upon the salary of an individual and the organisation where he or she is employed.

But, some banks have now come to the rescue of parents under the financial burden of getting their son's or daughter's marriage accomplished.

These banks provide loans specifically meant for gold jewellery, and the interest charged on such a loan is cheaper than that charged on a personal loan. The unprecedented rise in the price of the yellow metal in recent times has made parents consider this option to buy gold ornaments.

Indian Bank, Andhra Bank, Corporation Bank, Canara Bank and South Indian Bank offer this loan aimed primarily at employed women aged between 18 years and 58 years.

The interest charged on this type of loan is about 10.50 per cent. The minimum amount of loan that can be availed of under this scheme is Rs 10,000 and the maximum Rs 2 lakh.

For a loan amount of up to Rs 50,000 neither collateral nor cash margin is required. However, a salary credit or undertaking from employer is a must.

In case the employer has a tie-up with other bank(s) for salary disbursement, post-dated cheques will be required. Banks do not charge a service fee for a loan amount of up to Rs 50,000, but for loans above Rs 50,000 a service charge 0.50 per cent is levied.

If the loan amount exceeds Rs 50,000, an additional security is required, which can be 15 per cent of the immovable property or national saving certificate or government bonds or a Life Insurance Corporation policy of equal value. Repayment has to be made on equated monthly instalments (EMIs) not exceeding 60 months.

In case a housewife takes the loan, for EMIs, she has to issue post-dated cheques herself or get them issued by her spouse.

Banks offering the loan have tie-up arrangements with reputed gold retailers, and the customers require to buy jewellery only from them.

The loan Federal Bank provides for buying gold coins or gold ornaments is different as it is granted only against the pledge of new gold coins or ornaments. The collateral, in this case, is the new gold coins or ornaments purchased.

Under the Federal Bank loan scheme, the maximum amount that can be availed of is Rs 75 lakh and the minimum Rs 50,000. The bank charges 9.50 per cent as interest "�and another 2 per cent depending on the prime lending rate "�on the loan.

A general manager of the bank says this loan is aimed at parents saving for their daughter's wedding, which is expected to happen in the next three-five years.

Individuals, who have the risk appetite to speculate on rising gold prices in future and want to make gains on it, can also avail of this product, he says.