Bank brochures quote annual percentage rates; the girvi trade thinks in rupees per hundred per month. If you are computerising a register, the software must reproduce your register method to the rupee — otherwise every closure becomes an argument. Here are the conventions, with worked numbers.
The rate: rupees per ₹100 per month
A counter quotes “₹1.50 per hundred” — meaning ₹1.50 interest per ₹100 of principal per month, i.e. 1.5% monthly, 18% per annum. Common counter rates run from ₹1 to ₹3 per hundred depending on loan size, purity and relationship.
| Counter quote | Monthly | Yearly equivalent |
|---|---|---|
| ₹1 per 100 | 1% | 12% |
| ₹1.50 per 100 | 1.5% | 18% |
| ₹2 per 100 | 2% | 24% |
| ₹2.50 per 100 | 2.5% | 30% |
Part-month rounding: the register rule
The near-universal register convention: any part of a month counts as a full month. A loan taken on 10 March and closed on 15 April has run one month and five days — the register charges two months. Some firms soften this with a grace of a few days, or charge half-month up to the 15th; whatever your house rule is, it must be applied identically on every loan, because customers compare notes.
Worked example: ₹50,000 at ₹1.50 per hundred, taken 10 March, closed 15 April. Months charged: 2. Interest: 50,000 × 1.5% × 2 = ₹1,500.
Simple interest — the default
Most counters run simple interest: principal × monthly rate × months charged. Nothing compounds while the loan runs; interest paid along the way just reduces what is outstanding on the interest account. It is transparent, easy to defend at the counter, and what most customers expect.
Yearly compounding — the anniversary rule
On long-running loans many registers compound annually: on each anniversary, unpaid interest is added to principal and the next year’s interest accrues on the new figure. On the register this is often written as closing the old loan and opening a fresh one for principal + arrears — a renewal.
Worked example: ₹50,000 at ₹1.50/100, nothing paid for 2 years. Year 1 interest: ₹9,000. Compounded principal: ₹59,000. Year 2 interest: 59,000 × 18% = ₹10,620. Total due: ₹69,620 — versus ₹68,000 on pure simple interest. The gap widens fast in year three; that is why registers renew.
Why software must copy the register, not replace it
A computer that charges 1 month and 5 days of exact-day interest when the register would charge 2 months does not match the counter — and the counter is what the customer agreed to. GoldKhata was built inside a running firm precisely to reproduce register methods: monthly rounding, house grace rules and yearly renewal/compounding are settings, and every receipt shows the months charged so the arithmetic is inspectable. Try the numbers yourself on our gold loan interest calculator.
Frequently asked questions
What is the typical gold loan interest rate at a pawnbroker in India?
Counter rates commonly run ₹1–₹3 per ₹100 per month (12%–36% per annum) depending on loan size, gold purity and the relationship — subject to the state's notified caps for licensed lenders. Rates below bank-NBFC level exist because the pledge fully secures the loan.
Why was I charged 2 months' interest for 35 days?
Because of part-month rounding: the register convention counts any part of a month as a full month. 35 days spans two calendar months of the loan's life, so two months are charged. Firms that state this on the pledge card have far fewer counter arguments.
Is interest on a gold loan simple or compound?
While the loan runs normally, simple. On long-running unpaid loans, many firms compound annually by renewing — adding unpaid interest to principal on the anniversary. Which applies to you is written into your firm's method; ask for it in writing.