Despite popular stereotypes, non-resident Indians (NRIs) can find themselves in need of credit due to unforeseen financial emergencies. NRIs can borrow personal credits and even home loans, but can NRIs apply for gold loans in India? In brief, the answer is yes, and this article outlines the essential details of gold loans for non-resident Indians.
Importance of Gold in India
Indians are among the world's largest gold consumers. The yellow metal is the most popular investment avenue for Indians and an integral part of Indian culture. Indians buy it for decoration, religious worship, showing status and also swear by its medicinal benefits. Experts estimate that Indian households hoard an estimated 25,000 tons of gold in private stock that can serve as ready collateral when a finance is needed.
NRI families may also own as much gold as their resident counterparts. Indians tend to have a deep loathing for pledging their gold assets for credit, and hence it remains an underutilized asset class. However, pledging jewelry is the quickest way to get your emergency needs financed.
And yet, non-resident Indians may have a hard time getting credit access as they often do not have permanent residence either in India or their country of work. Most credit applications need NRIs to produce co-applicants. Gold loan eligibility is comparatively hassle-free.
What is an NRI?
Understanding the legal framework of the non-resident Indian status is vital to know about NRI gold loan eligibility. As per Indian laws, a resident is an Indian who stays in India for only 182 days in one financial year or 365 days over 4 consecutive years plus 60 days in the year under consideration. Everyone else is an NRI. Non-residents may own property in India, and their income accrued in India is taxable.
How Do Gold Loans Work?
Jewellery credits are secured finances, i.e., mortgages given against collateral, which is self-explanatory. Gold jewelry, bars, coins etc., can be pledged for the appropriate credit amount. The mortgage amount is sanctioned based on the yellow metal's value as collateral and usually a percentage. Shriram Finance offers up to 75% of the gold value as jewellery loan for NRIs.
The purity of the gold is key, with only 18-24k accepted as collateral. The lenders examine the documents submitted and the jewelry or bars and prepare a credit agreement with details of repayment and collateral repossession. They decide an interest rate and tenure to repay the finance and disburse the jewellery loan for NRI account almost instantly.
When you have repaid the finance in full with all the charges, the gold items are returned to you. Financial institutions provide a pawn receipt when they take the yellow metal when approving a jewellery loan for NRI. It contains all the details of the jewelry, such as weight, karatage etc. The lenders ensure secure storage of your ornaments and return them upon production of receipt when the mortgage closes.
If the borrower fails to repay the lent money, the lender keeps the possession and may auction them to raise funds. That is why credit discipline is of utmost importance. The yellow metal often holds sentimental value, and no one wants to lose their dearly adored heirlooms while getting a jewellery loan for non-resident Indians.
Gold Loan Eligibility for NRIs
Gold loan eligibility criteria for resident and non-resident Indians are quite similar in many respects, but one key difference is that NRIs usually need a co-applicant.
Financing against jewelry is a good option since the documentation is minimal and fuss-free. The gold loan eligibility criteria are as follows:
1. The minimum applicant age is 18, and the maximum age limit is 60.
2. The applicant can be salaried, self-employed, business owners, etc.
The documents to be submitted are as follows:
- Proof of Identity: PAN card, Aadhar card, passport, voter ID card, driving license
- Proof of Address: passport, driving license, utility bills like gas bill, electricity bills etc.
- Passport size photographs
Gold loans for NRIs don't require income proofs since the credit value is so closely linked to the security.
As NRIs typically cannot show current address proof, most lenders ask them to apply for credits with a co-applicant. However, if the passport and PAN card or rental agreement can be shown, you can meet the address proof requirement for jewellery credit eligibility.
Other Loans vs Gold Loan for NRI
There are many reasons why the choice of jewellery loan for NRIs makes sense.
1. Preferable to Personal Loans
Personal finances for NRIs generally come at a higher interest rate due to the credit unsecured nature. Lenders may also compel applicants to bring a co-applicant who resides in India as well as a guarantor. But when taking financing against the noble yellow metal, you don't have to meet such requirements, and Shriram's interest rate of jewellery loan for NRI begins at 11.5%.
A loan against high carat gold can easily be foreclosed at any point in time after credit disbursal by repaying the outstanding amount as a lump sum payment. Non-resident Indians may be able to make bulk payments later when the income stream improves. Many personal mortgages, in contrast, have a lock-in time when they cannot be foreclosed. The penalties are low, as are the various charges.
2. No Hassle with Credit Score
Another advantage is that the credit score does not matter since the loan-to-value ratio is 75%, and the gold will be pledged for the funds. It can be difficult to increase credit score when the income is low or enough history has not been built through credit card repayments and other methods.
3. Common Myths and Fears
Many NRIs and people of Indian descent share the same sentiment towards gold and hesitate to pledge their jewelry even when there is a dire need for money lending. Often, people may have struggled for years to gather the ornaments and bars or inherit them from beloved relatives. There is also a fear that the financial institution would not return the gold or give back a fake of low value. However, these are myths and completely untrue.
4. Popularity Trends in Gold Loans
Informal loans against pledged jewelry have always existed, with people giving their ornaments to pawnbrokers or moneylenders for money. It's a very risky route as there is no insurance and system to ensure safe return upon repayment. Banks and NBFCs have been mainstreaming the product. Now, more people are approaching institutional lenders as the interest rates are far lower. Many in need of long-term funds are also turning to the noble metal.
People show higher demand for gold-based financing in crises, both personal and global, such as the COVID pandemic. It is because gold prices tend to skyrocket as it is seen as a stable asset. Hence, NRI financing applications and deposits grew in 2020-21. Institutions also reported that people opted for higher tenures at this time.
If you are a non-resident Indian in need of quick credit of Rs 10000 to Rs 20 L, Shriram Finance can offer you a loan against gold jewelry at a simple rate of interest. If you already have other credits and are worried about your credit score, this is the right option.
NBFCs like Shriram Finance provide a higher loan-to-value ratio for finances. You can also rest assured about your property's security during the repayment period as Shriram Finance also provides insurance coverage.
With the advent of digital banking, you can easily avail gold loan for NRIs by applying online. Shriram Finance has invested in offering high-quality digital services and is ready to assist you with all your credit-related needs.