If you lend money against gold in Karnataka, you need a licence before your first loan. This guide is written from the counter, not from a law book — our family firm, Cauvery Bankers in Suntikoppa, has held licence 44/2005-06 for two decades and renewed it every year since. Here is how the process actually works.
Which law covers you
Two Karnataka Acts matter, and many gold-loan firms need both:
- Karnataka Money Lenders Act, 1961 — covers lending money at interest. Any girvi / gold-loan business is money lending.
- Karnataka Pawn Brokers Act, 1961 — covers taking goods (gold, silver, articles) as security for the loan. If you hold the customer’s ornaments, this Act applies to you too.
In practice the same district authority — the Registrar of Money Lenders for your district (usually the Deputy/Assistant Registrar of Co-operative Societies acting in that role) — administers both licences, and firms commonly hold the pair.
Where and how to apply
- Visit the office of the Registrar of Money Lenders for your district and ask for the current application forms for money lending (and pawnbroking, if you will hold pledged gold).
- Submit the filled forms with the supporting documents (next section) and pay the licence fee and security deposit for your declared capital.
- The office verifies the application — expect a visit or a police-verification step in some districts — and issues the licence with your firm name, address and licence number.
Timelines vary by district and season. Applying well before you plan to open, and keeping photocopies of everything you submit, saves repeat trips.
Documents to keep ready
Exact checklists differ by district, but you will typically be asked for:
- Proof of identity and address of the proprietor / partners
- Proof of the business premises (ownership or rent agreement)
- A declaration of the capital you will employ in the business
- Passport photos, and PAN of the proprietor / firm
- Partnership deed, if the firm is a partnership
What the licence obliges you to do
Getting the licence is the easy part. Keeping it means, among other things:
- Display the licence prominently at the shop, and quote the licence number on your documents.
- Charge within the interest caps notified by the government from time to time.
- Give every pawner a pledge receipt / pawn ticket with the loan particulars.
- Maintain the statutory registers — loan ledger, pledge register, cash book — and produce them on inspection. See our guide to the registers Karnataka expects you to keep.
- Renew every year before expiry — a lapsed licence means every loan you make is unlicensed lending, with penalties to match.
Lending without a licence
Unlicensed money lending is an offence under the Act — courts can refuse to help you recover unlicensed loans, and fines and prosecution are on the table. Just as damaging for a family business: customers, banks and the police treat a licensed firm entirely differently. The licence is the foundation the whole business stands on.
How software fits in
The Acts were written for paper registers, and inspectors still ask for them in that shape. GoldKhata keeps the gold loan ledger, pledge register and delivery register as you work — every loan, interest receipt and release lands in the right register automatically, printed in the statutory column format when the inspector visits. Your licence number sits on every pledge card and notice it prints.
Frequently asked questions
Do I need both the money lending and pawnbroker licences?
If you hold the customer's gold as security — which is what a girvi business is — the safe answer is yes: the Money Lenders Act covers the lending, the Pawn Brokers Act covers holding pledged goods. Confirm with your district Registrar; most gold-loan firms hold both.
How long is the licence valid?
Licences run for a licence year and must be renewed before expiry. Build the renewal into your annual calendar the way you build in Deepavali — missing it puts every subsequent loan on the wrong side of the Act.
How much does the licence cost?
The fee and security deposit depend on your declared capital and are revised by notification, so any number printed on a website goes stale. Ask your district Registrar of Money Lenders for the current schedule.
Can I run a gold loan business from home in Karnataka?
The licence is issued for specific premises, and you must display it there. Whether a residential address is acceptable is a district-level question — raise it with the Registrar before you apply.