Gold loan tagged as agriculture by bank, though I’m not a farmer — should I be worried? 

I recently applied for a Rs 50,000 gold loan at a public sector bank and received it at around 8–9% interest after submitting my jewellery. However, all the acknowledgement messages classify it as an agriculture gold loan. I’m not a farmer, so this is worrying me. The bank staff said loans below ₹2 lakh are sometimes tagged this way internally and that it’s nothing to worry about. I’ve also read that banks may do this to meet targets, as long as the interest rate isn’t the lower agri rate. Could this misclassification cause any compliance issues or problems for me later?

Advice by Akhil Rathi, Head – Financial Advisory at 1 Finance

In my view, this looks like an internal system error where your gold loan has been wrongly tagged as an agriculture gold loan. If your end use is personal and not for agricultural activity, then it cannot be considered an agri loan. Don’t worry, such tagging mistakes sometimes happen in banks’ internal systems. You should speak with your bank and also email their customer care explaining the issue clearly. Check your loan agreement copy carefully to confirm the loan type, purpose, and interest rate mentioned there.

However, just because the SMS or acknowledgment slip shows “agriculture gold loan,” it doesn’t mean it’s a government-subsidised or priority-sector agriculture loan. These are usually internal codes used by banks for data entry. Still, it’s better to have written clarification from the bank for your record. If the branch doesn’t resolve it, escalate your concern to the bank’s grievance redressal or nodal officer so that the correction is made officially, and you have proper documentation for future reference.

What is an agriculture gold loan?

An agriculture gold loan is a specialised credit product designed to meet the financing needs of farmers and those engaged in allied agricultural activities. It allows borrowers to raise funds by pledging gold jewellery or ornaments as collateral, offering a quick and relatively affordable source of capital. These loans are commonly used to meet seasonal requirements such as purchasing seeds and fertilisers, repairing farm equipment, investing in irrigation, or managing day-to-day operational expenses during the crop cycle.

One of the key attractions of agriculture gold loans is their competitive pricing. Many banks and financial institutions offer these loans at interest rates starting from around 7% per annum, making them cheaper than most unsecured or personal loans. However, interest rates, eligibility criteria, loan tenure and charges vary across lenders. Loan amounts can range from as little as ₹1,000 to several crore rupees, depending on the value and purity of the gold pledged. Tenures typically run from one month to three years, with repayment options that include lump-sum payments, instalments or customised schedules.

What sets agriculture gold loans apart from regular gold loans is their purpose and structure. These loans are exclusively meant for agricultural and allied uses and are often linked to government-backed schemes or interest subvention benefits. As a result, they tend to carry lower interest rates and more flexible repayment terms. Repayment schedules are frequently aligned with harvesting cycles, allowing farmers to repay after crop sales rather than through rigid monthly EMIs.

Regular gold loans, by contrast, can be used for any personal need and are available to a wider pool of borrowers, including salaried and self-employed individuals. They generally attract higher interest rates and follow standard repayment structures. Agriculture gold loans may also offer slightly higher loan-to-value ratios, enabling farmers to borrow more against the same quantity of gold.

Overall, agriculture gold loans provide a tailored and cost-effective financing option that reflects the seasonal and cash-flow-driven nature of farming.