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 

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.

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.