Amid demand surge, banks amp up focus on gold loans

Businesswoman counting money, calculating the conversion rate of Indian Rupee money as a return of financial investment at the table in her office indoors.
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As gold prices hit record peaks, banks are reporting unprecedented demand for loans backed by the precious metal.

RBI data reveals scheduled commercial banks held ₹3.58 lakh crore in gold loan portfolios by November 2025, reflecting a 125% year-over-year surge. This growth starkly outpaces credit card lending (up 2.4%) and general personal loans (rising 9%) during the same timeframe.

Financial analysts observe that banks are prioritizing gold-backed lending to sustain credit expansion amid global economic uncertainties. “Banks are rebalancing toward secured assets, making gold loans an attractive option in a market historically led by NBFCs,” noted Vivek Iyer of Grant Thornton Bharat.

Collateral Dynamics

Rising gold valuations directly enhance lending potential, allowing financial institutions to issue larger loans against the same collateral while complying with RBI’s 75-90% loan-to-value norms. “Stable LTV ratios combined with appreciating collateral values have driven higher disbursements,” Iyer explained.

Crisil Ratings’ Aparna Kirubakaran highlighted similar shifts: “Slower growth in unsecured retail segments has accelerated banks’ gold loan focus over the past two years.” Industry estimates suggest banks now command 55% of India’s gold loan market.

The segment maintains strong asset quality, with September 2025 GNPAs at just 0.8% per RBI reports.

Behavioral Drivers

Cultural attachment to gold incentivizes repayment, with borrowers prioritizing loan clearance to reclaim family assets. This emotional dynamic underpins the product’s low default rates nationwide.

Major NBFCs mirror this growth trajectory. Muthoot Finance’s gold assets surged 47% YoY to ₹13.2 lakh crore in Q2 FY26, while Manappuram Finance grew its gold portfolio by 29% to ₹31,505 crore. IIFL Finance recorded the sharpest increase, tripling its gold AUM to ₹34,577 crore.

Published on January 26, 2026