Rapid growth in gold loans amid elevated gold price volatility merits continued vigilance: FSR

The report warned that a sustained drop in gold prices might erode collateral safeguards, heighten borrower pressure and lead to more defaults.

Despite contained asset‑impairment risks and loan‑to‑value ratios that still offer a comfortable buffer, the swift rise in gold‑backed lending during a period of heightened price swings calls for ongoing vigilance, the RBI’s Financial Stability Report notes.

Borrower pressure

The report warned that a lasting decline in gold prices could diminish collateral coverage, raise borrower strain and push up delinquency rates. Gold‑backed lending also covers agricultural gold loans secured by jewellery, ornaments and coins.

Gold loans now constitute the biggest slice of non‑housing retail lending, expanding at a compound annual growth rate of 42.4 % since March 2024 — roughly double the 23.0 % CAGR seen across the broader non‑housing retail loan book over the same span, according to the FSR, a semi‑annual report compiled by all financial‑sector regulators.

The document observes that banks and non‑bank financial companies have markedly enlarged their gold‑loan books in 2025‑26, eclipsing the growth of other retail segments such as home loans, a development buoyed by a steep rise in gold prices.

The FSR attributes the recent surge in gold‑loan balances chiefly to current borrowers tapping higher gold prices to obtain bigger loans and refinance existing debt, a pattern reflected in the disparity between new loan origins and the total outstanding balance.

This effect is especially pronounced among NBFCs, whose loan origins have vastly outstripped those of both public and private‑sector banks.

By the end of March 2026, lenders’ collective gold‑loan book had climbed 54.5 % year‑on‑year. Breaking it down, NBFCs posted the strongest gain at 96.5 %, public‑sector banks rose 51.6 % and private‑sector banks advanced 44.7 %. The total outstanding gold‑loan exposure reached ₹18.4 lakh crore, according to RBI figures.

Gold‑linked lending is governed by an LTV ceiling ranging from 75 % to 85 %, which varies with the size of the gold loan.

“Notably, lenders’ LTV ratios have fallen even as gold‑loan volumes have risen, thanks to climbing gold prices. This has bolstered collateral cushions and given lenders a bigger buffer against adverse price swings,” the report stated.

The FSR observed that the swift expansion of gold‑loan books has accompanied a slowdown in outstanding personal‑loan growth for customers who hold both personal and gold loans, a dynamic that is especially evident among sub‑prime borrowers, whose personal‑loan balances and account counts have fallen.

Published on June 30, 2026