India’s gold loan market has emerged as the standout performer in retail credit, doubling in size over the past fiscal year and eclipsing the growth of traditional lending segments such as housing, vehicle, and even credit cards. According to Reserve Bank of India (RBI) data, outstanding loans against gold jewellery soared 103% to ₹2.09 lakh crore as of March 2025, up from ₹1.03 lakh crore a year earlier, making gold loans the fastest-growing category even as overall bank credit growth slowed

Several factors have converged to fuel this remarkable expansion:

• Rising Gold Prices: The value of pledged jewellery increased as gold prices surged, enabling borrowers to secure larger loans against the same collateral.
• Regulatory Shifts: The RBI’s crackdown on unsecured lending, particularly personal and microfinance loans, prompted both banks and non-banking finance companies (NBFCs) to pivot toward secured lending products like gold loans
• Loan Reclassification: In 2023, the RBI directed banks to reclassify certain agricultural loans as gold loans, further boosting the reported figures
• Shift from Informal to Formal Sector: Regulatory tightening and digital onboarding have encouraged borrowers to move from informal lenders to banks and NBFCs, especially in southern India where gold-backed lending is deeply entrenched

Market Impact and Outlook

Gold loans now account for approximately 3.5% of total retail credit, up from 1.2% five years ago NBFCs such as Muthoot Finance and Manappuram Finance-where gold loans form a significant portion of assets under management-have reported record disbursements, despite recent RBI signals of stricter supervision and compliance requirements.

Lenders highlight the appeal of gold loans for their low credit risk and quick disbursal, with repeat customers often leveraging rising gold prices to refinance or increase their borrowing limits. While the sector’s asset quality remains robust, analysts note a slight uptick in overdue loans, reflecting the broader economic environment.

Contrary to popular perception, gold loans are not limited to financially distressed borrowers. Banks report growing demand from small businesses and middle-class households seeking short-term working capital, with average ticket sizes exceeding ₹1 lakh and low default rates.

As India’s love affair with gold endures and regulatory dynamics continue to evolve, gold loans appear set to retain their glitter in the retail credit landscape.