Loan Against Sovereign Gold Bond (SGB) is a financing option offered by banks and financial institutions where you can borrow money by pledging your SGBs as collateral. It’s like taking a loan against any other valuable asset like gold jewelry or property. Sovereign Gold Bonds are government-issued securities that offer a fixed interest rate and are backed by the gold price.
Why Take a Loan Against SGB?
There are several reasons why someone might choose to take a loan against their Sovereign Gold Bonds (SGBs) instead of other borrowing options:
- Access to funds without selling: This is perhaps the biggest advantage. Unlike selling your SGBs and realizing any capital gains (taxable!), a LASGB allows you to access cash while retaining your gold investment. This can be valuable if you urgently need money for an emergency but still believe in gold’s long-term potential.
- Lower interest rates: Compared to unsecured personal loans, LASGB typically offers lower interest rates because the SGBs act as collateral for the lender, reducing their risk. This can save you a significant amount of money over the loan term.
- Liquidity and future price appreciation: You still benefit from any future price increase in the value of your SGBs even after taking out the loan. Additionally, you can easily sell your SGBs (once the loan is repaid) if needed without having to worry about potential storage or security concerns associated with physical gold.
- Flexibility: LASGBs offer some flexibility in terms of loan amount and tenure, allowing you to tailor the loan to your specific needs.
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Interest Rates for Loan Against SGB
The interest rates for loans against Sovereign Gold Bonds usually vary across banks. Here is an overview of the interest rates and charges for Loan Against SGB:
| Loan amount | ₹20,000 to ₹25 Lakhs |
| Collateral | Sovereign Gold Bonds in both Demat and BLA/Physical Certificate form |
| Interest Rates | Starting from 8.65% p.a |
| Loan Value | Up to 70% of the market value of SGBs depending on the loan amount |
| Tenure | Ranging from 12 to 36 months |
Note: The interest rates and tenure vary across various lenders. Do visit the official website.
Top Banks Providing Loans Against SGB
Major banks offer loans against Sovereign Gold Bonds. Here is a comparative table showing the top banks that offer LASGBs with interest rates:
| Top Banks | Interest Rate |
|---|---|
| SBI | 8.65% p.a |
| ICICI Bank | 9.5% p.a |
| HDFC Bank | 8.75% p.a |
| Axis Bank | 9% p.a |
| Bank of Baroda | 9.9% p.a |
| Union Bank | 8.8% p.a |
| Indian Bank | 9.05% p.a. |
| Federal Bank | 12.50% p.a. |
Note: The interest rates are subject to change based on your creditworthiness.
Eligibility Criteria For Loan Against SGB
The eligibility criteria for a loan against SGB varies across lenders. However, here is a general overview of the requirements that you need to meet:
- Age: 21 years or above (some banks may require 25 years)
- Citizenship: Indian resident
- SGB holding: Must hold dematerialized SGBs issued by the Government of India
- The applicant must have a Demat account
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Documents Required For Availing Loan Against SGB
Sovereign Gold Bonds allow investors an opportunity to avail loans against the bonds from banks and other lenders. When applying for such SGB backed loans, the key documents required to be submitted for loan processing includes:
KYC Documents:
- Identity proof: PAN card, Aadhaar card, passport (any one)
- Address proof: Latest utility bill, bank statement, rental agreement (any one)
- Latest photograph
Proof of Ownership of SGBs:
- SGB bond certificate
- Latest SGB statement from RBI designated bank
Other Financial Documents:
- Last 6 months’ bank account statements
- Last 2 years IT returns (if applicable)
- Salary slips for last 3 months (if salaried)
- Loan Application Form of Bank/NBFC
Features & Benefits of Loan Against SGB
Loan Against SGB can be a strategic financial tool for accessing funds while retaining your gold investment and potentially benefiting from its future value. Here are the benefits of a loan against SGB:
- Liquidity: Access funds without selling your SGBs and potentially benefit from future price appreciation.
- Reduced cost: Lower interest rates compared to unsecured loans.
- Flexibility: Tailor the loan amount and tenure to your needs.
- Security: SGBs remain in your demat account, minimising storage and security risks.
- Quick disbursement: Faster approval and disbursement process compared to other loans due to readily available collateral.
How to Apply For Loan Against SGB
Seeking liquidity against Sovereign Gold Bonds has been made hassle-free by banks through online loan processing and disbursal. Investors can now submit applications easily using these steps:
1. Visit the website of your chosen lender that provides SGB loans e.g. SBI, HDFC Bank, etc.
2. Look for the “Loan Against SGB” option and click on the “Apply Now” button.
3. Log in to your account and fill out the online loan application form. Provide all the required details.
4. Upload soft copies of the required documents – Identity proof, Address proof, SGB bond certificates, Financial statements, etc.
5. Provide additional KYC details and upload a photograph.
6. Accept the terms & conditions and pay the processing fee if applicable.
7. Click submit. If approved, the loan amount gets credited to your bank account directly.
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