Erode, Oct 6: The Tamil Nadu Government has raised the maximum amount that can be borrowed against gold jewellery through cooperative institutions from ₹7,000 to ₹10,000 a gram, subject to a ceiling of 75% of the jewellery’s market value.
The revised limit will apply to both fresh jewel loans and existing loans being renewed, according to the Cooperation Department. The decision was taken at a meeting held on Monday (October 5).
The move comes amid a sharp rise in the use of jewel loans through the cooperative network. During 2025-26, cooperative institutions in the State disbursed jewel loans worth about ₹74,100 crore to around 65 lakh borrowers, according to figures reported from the Cooperation Department.
The cooperative credit network includes 24 District Central Cooperative Banks (DCCBs) operating through 940 branches and 4,477 Primary Agricultural Cooperative Credit Societies (PACCS).
The maximum interest rate on cooperative jewel loans had been raised from 12% to 13% last year. Under the earlier system, loans were available up to 75% of the market value, subject to the ₹7,000-a-gram ceiling for six-month loans.
The Government has also sought to reduce the interest-rate disparity between DCCBs and PACCS. The interest charged by DCCBs on jewel-loan cash credit facilities extended to PACCS must be at least 1.25 percentage points lower than the rate charged on jewel loans directly through DCCB branches. The margin of PACCS has been capped at 2.25%.
The move is significant for farmers as gold jewellery is also pledged for agricultural working-capital requirements. Cooperative institutions provide jewel loans to farmers, while banks such as Tamil Nadu Grama Bank offer agricultural jewel loans against gold for crop cultivation and allied activities.
For comparison, public sector banks generally lend against gold at rates that vary according to the scheme and valuation. SBI’s 12-month bullet gold loan currently carries an interest rate of 9.15%, while Indian Bank reported rates of 7.80% to 8.65% for term jewel loans during the first quarter of FY2025-26.
Unlike the cooperative system’s newly prescribed ₹10,000-a-gram ceiling, public sector banks do not generally prescribe one uniform per-gram amount across all gold-loan products; the amount depends on the gold valuation, purity, loan scheme and applicable loan-to-value norm.
