Challenges in Clearing Gold Loans Present New Opportunities
Many individuals struggle to repay their gold loans, risking the loss of their pledged gold, which ultimately diminishes its true value. In response, some buyers in the informal sector are capitalizing on this situation by offering tempting deals for those unable to clear their loans.
The gold’s value is determined by the market price on the transaction day. After deducting costs associated with releasing the gold from the pledge, customers receive the remaining balance immediately, albeit with a processing fee and applicable GST. Processing fees range from 4% to 6% depending on various buyers and may be subject to negotiation.
Loan Process
The process, as outlined by DRU Gold, a private entity with multiple branches in Telangana and Andhra Pradesh, is straightforward. Customers seeking loan amounts exceeding ₹3 lakh must present a PAN card and proof of address. A staff member will accompany customers to facilitate the release of their pledged gold and assist in settling the account on the spot.
KMK Gold Traders has promoted the benefits of selling pledged gold, suggesting it can provide cash to those facing delays in repayment. This approach helps customers save on interest and avoid the final loss of their pledged assets. The company also features pledged gold calculators on their websites for customer convenience.
Individuals are increasingly engaging with this service. One customer, G.R. Rao, recounted, “I needed to pay ₹3 lakh to release 30 gm pledged with an NBFC. When I approached a pledged gold buyer, a staff member accompanied me to release it and later purchased it. I received ₹37,300 in cash.”
Growth Drivers
The continuous rise in gold prices, coupled with the inability of some loan customers to repay, fuels this trend, as described by Ramachari, owner of Chari Pledged Gold buyers. “We earn through transaction fees, but our significant profit comes from our investment in gold as its price increases. Customers also benefit by receiving cash rather than losing their entire gold,” he noted.
According to government data, non-performing assets (NPAs) in gold loans offered by non-banking financial companies (NBFCs) have risen, with NPAs reported at 2.14% in March 2025 compared to 1.21% in March 2023.
Most pledged gold buyers operate under badge registration as pawn brokers or money lenders, while some claim local trade licenses and registration with the Bureau of Indian Standards.
