Gold is always considered to be attractive and with festive season around the corner, Indian banks have started promoting gold coin purchases at their branches. However, a loan to purchase gold is yet not a common thing in the country. Most banks loan portfolios have not been matched with loan options for gold purchases.

There are only a few like Indian Overseas Bank and Corporation Bank that offer loans to purchase gold and platinum jewellery. On the other hand, there are some like Canara Bank that have stopped offering a loan for such purchases.

Keyur Shah, Associate Director of the World Gold Council says: "Banks currently offer loan for gold purchases to only government employees or those who have a salary account with them. The loan is available only for buying gold bars, not jewellery."

The World Gold Council is in discussion with several banks and national gold jewellers to provide a facility of equated monthly installments (EMIs) for gold purchases.

"In times of volatility and global crises, gold jewellery purchases on EMI would be beneficial. We have been talking with banks and national players to offer gold on EMI," says Shah.

"Affordability is a factor in gold purchases. When loans are available to purchase consumer durables, home, etc, why not for gold?" he questions.

Bankers feel that the risk involvement with such loans is rather high. A bank officer says, "The prices are volatile and, in case the person defaults, it is not as easy to recover a gold asset as it is to recover a home or vehicle."

Shah somehow did not agree with the banker and says, "If security and risk can be taken care of in the white goods industry, it can be taken care of in the gold industry as well."

Jewellers confirmed that there are not too many purchases through gold loans as these loans are not consumer friendly.

V Govindraj, VP, integrated retail services at Tanishq said, "Banks have restrictions for offering gold loans. Unlike a personal loan or a consumer durables loan, a loan for buying gold jewellery is not sustainable. Unlike a television, which sees a significant drop in value once it is purchased, in the case of gold, the value may even increase after it's bought. Gold is a liquid asset and can be moved and so structuring a product may not be possible."

It is not easy to avail a gold loan as banks demand a security such as LIC policy, Kisan Vikas Patra, National Savings Certificate (NSC) for credit amount exceeding Rs 50,000. For instance if a person wants to avail a gold loan of Rs 1 lakh, he would only get first Rs 50,000 without a security and for the balance Rs 50,000 a security would have to be submitted with the bank.