What is a bullet payment? (Bullet repayment)

A bullet payment repays the whole principal, and sometimes all the interest, in one sum on the loan's last day.

Written 07 September 2026. For bankers in India.

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In one line

A bullet loan has no monthly instalments. The borrower pays the principal, and sometimes all the interest, on one date at the end.

Why it matters to you

• Where you meet it. Gold loans, short business loans, crop loans timed to the harvest, some corporate loans and bonds.
• What you lose. No monthly repayment record. You learn whether the borrower can pay only on the last day.
• What RBI fixes. Consumption gold loans: bullet tenor capped at 12 months; interest counts in LTV (Loan to Value).
• What goes wrong. The due date passes, the sum is not paid, and the account is overdue from that day.
• Your job. Size the loan on the maturity amount, fix the due date, and note it in your diary.

How it works

Maturity means the last day of the loan, when the sum falls due. A bullet loan comes in three shapes.

1. Full bullet. Nothing is paid during the loan. Principal and all interest are paid together on the last day.
2. Interest first, principal last. Interest is paid monthly or quarterly. The principal is paid in one sum at maturity.
3. Balloon. Small instalments run through the loan. One large last instalment clears the balance. It is a partial bullet.

Where each shape is used in India:

• Gold loans: the full bullet with a 12-month tenor is a common plan.
• Short business loans: a trader borrows to buy stock and repays when the stock is sold.
• Crop loans: the due date is set to the harvest and sale of the crop.
• Corporate loans and bonds: interest on fixed dates; the principal (a bond's face value) at maturity.
• Some housing lenders list a balloon plan for borrowers who expect a large future inflow.

The formula in words. The amount due at maturity is the principal plus the interest for the whole tenor. Interest may be simple, or charged at monthly rests. Monthly rests means the interest is added to the balance each month and earns interest itself.

The formula in symbols.

Simple interest: A = P + P x R x T / 100 Monthly rests: A = P x (1 + R / 1200)^N

• A = the amount due at maturity
• P = the principal
• R = the yearly rate in per cent
• T = the tenor in years
• N = the tenor in months

The risk to the lender. There is no repayment track during the loan. Everything depends on one date. The security must cover the maturity amount, not just the principal. If the borrower's plan fails, the lender learns it only at the end.

The risk to the borrower. One large sum falls due at once. If the money does not arrive, the gold is auctioned or the account slips. Interest runs on the full principal for the whole tenor, so the total cost is higher than under an EMI.

Worked examples

Example 1: a Rs 2 lakh gold loan, 12 months, 12 per cent, bullet repayment

Interest. Simple interest = 2,00,000 x 12 x 1 / 100 = Rs 24,000. Amount due at maturity = Rs 2,24,000.

At monthly rests: 2,00,000 x (1 + 12 / 1200)^12 = Rs 2,25,365. Interest = Rs 25,365. One public sector bank's business gold loan charges interest at monthly rests but collects it only at maturity. Your bank's policy decides which method applies.

LTV under the RBI rule. Treat this as a consumption loan of Rs 2 lakh. The RBI tier up to Rs 2.5 lakh allows LTV of 85 per cent. For a bullet loan the loan figure is the amount due at maturity, Rs 2,24,000. Gold value needed = 2,24,000 / 0.85 = Rs 2,63,529. At monthly rests: 2,25,365 / 0.85 = Rs 2,65,135.

For the same Rs 2 lakh as an EMI loan, the loan figure is Rs 2,00,000. Gold value needed = 2,00,000 / 0.85 = Rs 2,35,294. The bullet loan needs Rs 28,235 more gold value than the EMI loan.

The common error. Say the gold is worth Rs 2,35,294. A banker who tests principal only sees LTV = 85.0 per cent and sanctions. The RBI test gives 2,24,000 / 2,35,294 = 95.2 per cent. The loan is over the cap from day one.

Price fall. Take a correctly sized loan with gold worth Rs 2,63,529. If gold falls 10 per cent to Rs 2,37,176, LTV = 94.4 per cent. RBI says the LTV cap must be kept through the tenor. Your bank's policy says what to do next: extra gold, part payment, or notice.

The loan stays in the 85 per cent tier either way. Both Rs 2,00,000 and Rs 2,24,000 are under Rs 2.5 lakh. Gold value must come from the reference price by RBI's method. See "What the rule says".

If the due date passes. Say the loan falls due on 31 March 2027 and nothing is paid.

• Overdue from day-end 31 March 2027; SMA (Special Mention Account) 0 on that date.
• SMA is the warning tag before NPA.
• SMA-1 on 30 April 2027, at 30 days overdue.
• SMA-2 on 30 May 2027, at 60 days overdue.
• NPA at day-end 29 June 2027, when 90 days overdue are complete.

Renewal is allowed only after the accrued interest is paid, within LTV, and only if the account is standard. Standard means not an NPA.

Example 2: a Rs 20 lakh business loan, monthly interest, bullet principal

A trader borrows Rs 20,00,000 for 12 months at 11 per cent a year. The rate is assumed for this example. Interest is paid monthly. The principal is paid at the end.

• Monthly interest = 20,00,000 x 11 / 1200 = Rs 18,333.
• Months 1 to 11: Rs 18,333 each.
• Month 12: Rs 18,333 interest plus Rs 20,00,000 principal = Rs 20,18,333.
• Total interest for the year = 18,333 x 12 = Rs 2,20,000.

The last payment is about 110 times a normal month's payment. That is the whole point and the whole risk.

Compare 12 equal EMIs on the same loan. EMI = Rs 1,76,763. Total interest = Rs 1,21,160. The bullet plan costs Rs 98,840 more, because the full Rs 20 lakh stays out all year.

Bank practice. The banker fixes the due date after the trader's stock is sold and paid for. That is the working capital cycle. The file records where the Rs 20 lakh will come from. Your bank's policy decides the paperwork.

BankPulse view. Take a mandate or a post-dated instrument for the maturity sum. Call the borrower a month before the due date.

Overdue rule. The same rule applies as in Example 1. Unpaid on the due date means overdue from that day. NPA follows once 90 days overdue are complete.

What the rule says

RBI rule 1: gold and silver loans. The Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025. Reference RBI/2025-26/47, 6 June 2025, updated 29 September 2025. In our words:

• Paragraph 4: lenders must follow the Directions as early as they can, and no later than 1 April 2026.
• Paragraph 4 also: loans made before a lender adopts the Directions stay under the older rules.
• Paragraph 6(i): a bullet repayment loan is one where principal and interest both fall due at maturity.
• Paragraph 6(iii): a consumption loan is any permitted loan that is not income-generating.
• Paragraph 6(v): LTV is the loan outstanding against the gold's value on that day.
• Paragraph 6(v) also: for bullet loans the loan figure is the whole amount due at maturity, interest included.
• Paragraph 6(vi): an income-generating loan funds a productive activity, such as farming, business or a productive asset.
• Paragraph 11: renewal or top-up only within LTV, only if standard; a bullet loan only after accrued interest is paid.
• Paragraph 15: consumption loans with bullet repayment may run 12 months at most. They may be renewed under paragraph 11.
• The Directions set no tenor cap on income-generating loans, such as farm credit or business loans.
• Paragraph 17: the gold price is the lower of the 30-day average close and the previous day's close.
• Paragraph 17 also: the price comes from IBJA (India Bullion and Jewellers Association) or a SEBI-regulated exchange.
• Paragraph 18: only the metal's own value counts; making charges and other costs do not.
• Paragraph 19: LTV cap for consumption loans up to Rs 2.5 lakh is 85 per cent.
• Paragraph 19 also: 80 per cent above Rs 2.5 lakh up to Rs 5 lakh.
• Paragraph 19 also: 75 per cent above Rs 5 lakh.
• Paragraph 20: the LTV cap must be kept for the whole tenor, not only on the day of sanction.
• Paragraph 5: applies to commercial banks (not payments banks), co-operative banks, and all NBFCs including housing finance companies.

Source: RBI Lending Against Gold and Silver Collateral Directions, 2025. BankPulse rule page: Gold loan rules.

The same rules for commercial banks, in a newer document. On 28 November 2025 RBI issued the Commercial Banks - Credit Facilities Directions, 2025 (RBI/DOR/2025-26/154, updated 15 July 2026). Chapter IV carries the gold rules for commercial banks. Small finance banks, payments banks and local area banks are outside it.

• Paragraph 35: renewal of a bullet loan only after accrued interest is paid.
• Paragraph 39: consumption bullet loans capped at 12 months.
• Paragraph 44: the same LTV table, with a note on bullet loans.
• The note: both the LTV and the loan amount count the maturity sum.
• Paragraph 103: earlier RBI instructions on the subjects covered are repealed.

Source: RBI Commercial Banks - Credit Facilities Directions, 2025. We read the loan-amount note through a summary tool. The founder should confirm it against the text.

RBI rule 2: when a bullet loan is overdue and when it is an NPA. RBI Master Circular on Prudential norms on Income Recognition, Asset Classification and Provisioning (RBI/2025-26/13, 1 April 2025). In our words:

• Paragraph 2.3.1: any amount is overdue if it is not paid on the due date the bank fixed.
• Paragraph 2.1.2(1): a term loan is an NPA when interest or an instalment stays overdue more than 90 days.
• Paragraph 8.4: the tag is set when the system runs its end-of-day process on each date.
• Paragraph 8.4 example: due on 31 March 2022, unpaid, becomes NPA at day-end on 29 June 2022.

For a bullet loan, the one due date is the whole test. There is no earlier instalment to miss.

Source: RBI Master Circular on income recognition and asset classification, 1 April 2025.

RBI rule 3: crop loans and crop seasons. The same Master Circular, paragraphs 2.1.2, 4.2.13.1 and 4.2.13.2. In our words:

• Farm credit for short-duration crops: NPA when principal or interest stays overdue for two crop seasons.
• Farm credit for long-duration crops: NPA when overdue for one crop season.
• A long-duration crop is one whose crop season is longer than one year.
• The SLBC (State Level Bankers' Committee) fixes the crop season for each crop in each State.
• This crop-season test applies only to farm credit for the activities RBI lists in its Annex 2.
• Every other farm loan follows the 90-day test.

RBI rule 4: how the crop loan due date is set. Until 31 December 2026, the RBI Master Circular on the KCC (Kisan Credit Card) Scheme applies. Reference RBI/2017-18/4, 3 July 2017. Paragraph 10.1: banks fix the crop loan due date by the expected harvesting and marketing period of that crop.

From 1 January 2027, the KCC Directions, 2026 (RBI/FIDD/2026-27/402, 19 June 2026) apply to new KCC loans. Paragraph 14: banks fix the due date by the applicable crop season. Paragraph 6 defines that season: up to 12 months for short-duration crops, and 12 to 18 months for long-duration crops.

Sources: RBI Master Circular on KCC, 2017 and RBI KCC Directions for commercial banks, 2026.

Bank practice seen in the market. From lender pages opened on 7 September 2026. Your bank's policy decides. Margin is the part of the gold value the bank does not lend; margin = 100 per cent minus LTV.

• One public sector bank: 12-month bullet gold loan at 35 per cent margin; its EMI plan needs 28 per cent.
• Another public sector bank's business gold loan: bullet interest at monthly rests, due at maturity; margin 32 per cent.
• Gold loan NBFCs run most schemes for 12 months; some cut the rate if interest is paid monthly.
• Business lenders describe bullet plans with monthly interest and principal at the end for traders awaiting receipts.

Common mistakes

• LTV on principal only. RBI counts the maturity amount for bullet loans. Add the full-tenor interest before you test.
• Reading silence as good conduct. No instalments means no signal. Watch the gold price and contact the borrower before maturity.
• Renewing without collecting interest. RBI allows renewal only after accrued interest is paid. Collect first, then re-test LTV.
• An 18-month consumption bullet gold loan. RBI caps it at 12 months. Sanction 12 months, then renew if it qualifies.
• Crop-season NPA rule on every farm loan. It covers only listed farm credit. Other farm loans follow 90 days.
• Forgetting the due date. Unpaid on that day means overdue at once. Set a reminder 30 days ahead.

How to use it at your desk

1. Write the due date on the file and in the system. Set a reminder 30 days before it.
2. For gold: compute the maturity amount, principal plus full-tenor interest, by your bank's method.
3. Test LTV on that maturity amount against the gold value found by RBI's price method.
4. Confirm the tier and its cap from the RBI table: 85, 80 or 75 per cent.
5. For a consumption gold bullet loan, keep the tenor at 12 months or less.
6. For a business bullet loan, set the due date after sales cash returns. Record the lump sum's source.
7. For a crop loan, set the due date by the crop season the SLBC fixed for that crop.
8. On the due date, unpaid means overdue. Track SMA-0, SMA-1, SMA-2 and NPA at 90 days.
9. Renew only after accrued interest is paid, within LTV, and only if the account is standard.

Related terms

• LTV — the loan against the security; for a bullet gold loan the loan figure includes interest.
• Working capital cycle — a business bullet loan's due date should fall after cash returns from sales.
• Step-up EMI — a step-up plan still repays monthly; a bullet plan repays on one day.
• FOIR (Fixed Obligation to Income Ratio) — it counts monthly dues; a bullet loan has none; test the lump sum.
• Gold loan rules — the BankPulse rule page for loans against gold.
• Working capital rules — the BankPulse rule page for business borrowing.
• Today's policy rates — the policy rates behind the lending rate in the examples.

Quick check

Rs 2 lakh gold loan, 12 per cent, 12 months, bullet repayment. What loan figure enters the LTV test?

Answer: Rs 2,24,000 with simple interest, which is principal plus full-tenor interest. Not Rs 2,00,000.

What is the longest tenor RBI allows for a consumption gold loan with bullet repayment?

Answer: 12 months. It may be renewed, but only after the accrued interest is paid.

A bullet loan falls due on 31 March 2027 and nothing is paid. When does it become an NPA?

Answer: At day-end on 29 June 2027, when 90 days overdue are complete. It is overdue from 31 March.

Sources

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