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All About Agriculture Gold Loan

Discover all you need to know about Agriculture Gold Loans, including documents, eligibility & interest rate at IIFL finance. Get informed and finance your farm today

24 Jun,2024 09:34 IST 2736
All About Agriculture Gold Loan

An agriculture gold loan is a type of loan product offered by financial institutions like banks and non-banking financial companies to help farmers meet their credit requirements. Over the years, lenders have strived to make credit available easily in rural areas in order to ensure that farmers don’t get themselves into a debt trap by borrowing at exorbitant interest rates from unregulated players such as local moneylenders.

Gold loans are given by pledging gold, which is mainly in the form of jewellery, to lenders. The purity and quality of gold that is given as the collateral is checked before approval of the amount under gold loans.

Agricultural gold loans help farmers in meeting their financial requirements in two broad areas:

a) for production of crops; and
b) for allied activities such as dairy, fisheries, or any such related activities which are classified under agriculture by the government and the regulators like the Reserve Bank of India.

Lenders also give agricultural gold loans to entrepreneurs operating in the area of farming and allied sectors. Agricultural gold loans can be taken for the purchase of equipment and machinery, inputs like seeds and pesticides, development of land, irrigation, transportation of produce etc. Agricultural gold loans can also be taken for repayment of high-interest loans taken from non-financial players like individual moneylenders.

The process of taking agricultural gold loans has been simplified to ensure that farmers don’t miss out on crop cycles for lack of credit. The repayment schedule of agricultural gold loans is also flexible, in sync with the harvesting cycle if the loan is a crop loan.

Eligibility For Agricultural Gold Loans

* All farmers – tenant, oral lessees (not actual landholders), sharecroppers
* Entrepreneurs working in the area of agricultural and allied activities as defined by the RBI
* Age of the applicants should be between 21 and 70 years
* All applicants must meet the KYC requirements

Documents Required For Agricultural Gold Loans

* Photographs of the applicant along with a duly-filled application form
* Address and age proof such as Aadhaar Card
* PAN Card
* Record of land ownership such as 7/12 extract in states like Maharashtra
* Proof of allied agriculture activity
* A self-declaration from borrowers that they are taking agricultural gold loan for the purpose of repayment of higher interest rate loans taken from non-financial lenders

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Agricultural Loan Amount

The amount that can be availed under agricultural gold loans varies from lender to lender. The amount approved under the loan is based on the purity of the gold jewellery and the repayment capacity of the borrowers. Lenders verify the gold purity. Some lenders are comfortable giving higher quantum of loans, such as up to Rs 25 lakh, depending on the value of the collateral.

Lenders also decide the amount of agriculture gold loans per gram basis or on the loan-to-value basis. Under agriculture loan per gram, a particular amount of loans to be disbursed is decided for each gram of gold that is given as collateral. On loan-to-value, or LTV basis, most lenders give loans of up to 75% of the value of the pledged gold.

Interest Rate

The interest rate on agricultural gold loans starts from 7.00% per annum. Most lenders calculate the interest rate by adding a certain premium over their marginal cost of fund-based lending rates. The rate of interest on an agriculture gold loan also depends on the category of loan, demand loan, regular term loan or overdraft facility.

In the case of an overdraft facility, the eligible amount is deposited into the borrower’s bank account. Borrowers can use the amount as and when needed and the interest is only paid on the used amount.

Most banks do not charge any processing fee if the loan amount is up to Rs 300,000. For higher amount loans, a processing fee ranging from Rs 1,000-2000 is applicable along with the prevailing rate of Goods and Service Tax.


The repayment schedule is based on the type of loans. Most banks have a 12-month repayment cycle, from the date of disbursement, for agricultural gold loans. Borrowers can pay part or lump sum payment along with the interest rate within 12 months, which is extended to 18 months by some banks.

For agricultural goal loans taken for the purpose of farming, the repayment is in sync with the harvesting cycle and the cash flow of the borrowers. Term loans can be extended up to three years depending on the activity.


Agriculture gold loans have helped many farmers to expand their activities and also venture into allied activities and not just depend on crop production. Moreover, the interest rate on agriculture loans is attractive and is much lower than those charged by local moneylenders. Borrowers also get a flexible repayment schedule, which helps in focusing on business and managing their cash flows.

Lenders like IIFL Finance have also ensured that such loans are given in a simple and easy manner to farmers and entrepreneurs by explaining to them all the terms and conditions and ensuring that no hidden charges are levied.

IIFL Finance provides gold loans through a fully digital process that can be completed within minutes from anywhere. More importantly, it offers customised loan options to farmers to ensure the funds meet their capital requirements and the disbursement as well as repayment are in line with the sowing and harvesting periods.


Q1. What is the maximum agriculture gold loan?
Ans. Agricultural gold loan amounts vary by lender. A lot of factors are taken into consideration sauh as the purity of gold, your ability to repay, and the gold's value itself. Some lenders can offer as high as up to Rs 25 lakh based on collateral value. Typically, loans are capped at 75% of the pledged gold's worth (loan-to-value ratio)

Q2. What is the purpose of gold loan for agriculture?

Ans. The purpose of Agricultural gold loans can be classified into two key areas:

  • Crop Production: Funds can be used to cover expenses related to planting, fertilizers, pesticides, irrigation, and other essential aspects of growing crops.
  • Allied Activities: This broadens the scope beyond just crops. You can use the loan for expenses in related agricultural activities like dairy farming, fisheries, poultry, beekeeping, and more, as defined by the government and RBI.
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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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