Two major Indian companies—Bajaj Finance and Piramal Finance—are seeing early signs of trouble with gold loans. Over the past year, lending money against gold has been the fastest-growing part of their business.

Banks and financial companies have been rushing to offer these loans, believing that holding a borrower’s physical gold makes the investment safe and low-risk.

According to official data from the Reserve Bank of India:

Bank gold loans jumped 83% compared to last year, reaching 5.6 trillion rupees.

Non-bank gold loans grew 69%, rising to 3.6 trillion rupees.

Although overall default rates are still low, both companies are urging caution.

Bajaj Finance, which holds 240 billion rupees ($2.54 billion) in gold loans, reported an increase in late payments during its July–September results. The portion of loans overdue by 30 days or more (classified as ‘stage 2’ and ‘stage 3’ assets) rose by 15 basis points compared to the previous quarter.

The lender said overall assets classified as ‘stage 2’ and ‘stage 3’, which reflect loans overdue by more than 30 days rose 15 basis points compared to a quarter ago.