National News

Outstanding bank loans against gold more than doubled in a year

Published

1 year ago

May 2, 2025

In an unexpected divergence within India’s financial system, the fiscal year ending March 2025 witnessed a dramatic surge in gold-backed loans, even as overall credit growth decelerated. According to Reserve Bank of India (RBI) data, loans against gold more than doubled, rising by 103% from just over ₹1 lakh crore to nearly ₹2.1 lakh crore. This made gold loans the fastest-growing segment in the Indian credit market, outpacing all other lending categories.

This sharp growth in gold-backed lending occurred against the backdrop of slowing overall bank credit, which grew at 11% in FY25, down from a robust 20% in FY24. The contrast highlights both the resilience of asset-backed borrowing during times of economic strain and the evolving financial preferences of Indian households and small businesses.

Three key factors drove this boom:

Regulatory Reclassification by the RBI: In 2023, the RBI issued a directive requiring banks to reclassify many agricultural loans as loans against gold jewellery. This not only improved transparency but also artificially inflated the category’s growth figures. Banks traditionally prefer to label rural gold loans as agricultural credit to take advantage of lower interest rates and lenient repayment norms attached to farm lending.
Shift from NBFCs to Banks: Another major catalyst was the RBI’s move to curb gold lending by large non-banking financial companies (NBFCs), which had become dominant players in the sector. With regulatory limits in place, borrowers—especially those in rural and semi-urban areas—began shifting back to traditional banks for their gold loan needs.
Gold Price Appreciation: The continued rise in gold prices significantly boosted the borrowing capacity of individuals. Since loans are typically offered as a percentage of the gold’s market value, higher prices meant that customers could secure larger loan amounts without pledging more jewellery.

The explosion in gold loan volumes reveals much about the Indian financial ecosystem. On the one hand, it suggests increased financialisation of household assets, particularly gold, which has long been a preferred store of wealth in Indian society. On the other hand, it points to underlying financial stress, as households appear to be leveraging personal assets to meet liquidity needs in a slowing economy.

At a systemic level, the phenomenon underscores the interplay between regulatory decisions and credit flows, demonstrating how RBI’s interventions can redirect borrowing channels. While the gold loan segment soared, the broader deceleration in credit—from 20% to 11% year-over-year—raises concerns about investment appetite and consumption momentum, especially in key sectors like industry, infrastructure, and MSMEs.

National News

MCX Gold, Silver Surge On Escalating Geopolitical Tensions

The Softer Dollar Provided Limited Support To Bullion, While Traders Largely Focused On The Geopolitical Backdrop and The Prospect Of Fresh Clues On U.S. Monetary Policy.

Published

2 hours ago

July 14, 2026

JewelBuzz Spread The Buzz

Gold and silver prices edged higher in India on Monday as renewed geopolitical tensions in the Middle East boosted demand for safe-haven assets, even as investors remained cautious ahead of key U.S. inflation data expected later this week.

On the Multi Commodity Exchange (MCX), gold futures rose more than Rs 650 to trade above Rs 1.40 lakh per 10 grams, while silver futures gained nearly Rs 700 to move aboveRs Rs 2.18 lakh per kilogram. The advance reflected renewed risk aversion after the United States tightened pressure on Iran, rekindling concerns over the security of global energy supplies and the broader inflation outlook.

In international markets, spot gold rose about 0.4% to around $4,016 an ounce, recovering after briefly slipping below the psychologically important $4,000 level overnight. Spot silver also rebounded modestly but remained under pressure, trading near $58 an ounce.

The gains in precious metals came despite a relatively resilient U.S. dollar, which eased only marginally to around 101.2 against a basket of major currencies. The softer dollar provided limited support to bullion, while traders largely focused on the geopolitical backdrop and the prospect of fresh clues on U.S. monetary policy.

Energy markets reflected the same risk-off sentiment. U.S. West Texas Intermediate crude climbed toward $80 a barrel, while Brent crude advanced to around $85, extending gains as fears of supply disruptions returned to the forefront.

The latest catalyst came after President Donald Trump reinstated a blockade on Iranian vessels transiting the Strait of Hormuz and called on countries benefiting from U.S. naval protection to contribute toward securing the strategically vital shipping corridor. The move followed renewed hostilities between Washington and Tehran, heightening concerns that disruptions to one of the world’s busiest oil routes could fuel another wave of energy-driven inflation.

Higher oil prices have complicated the outlook for global central banks, particularly the U.S. Federal Reserve, which continues to balance inflation risks against slowing economic growth.

Investors are now turning their attention to the U.S. Consumer Price Index (CPI) data due Tuesday, which is expected to provide fresh direction for interest-rate expectations. Markets will also closely monitor Federal Reserve Chair Kevin Warsh’s testimony before Congress for signals on the central bank’s policy trajectory.

According to market pricing, traders now see roughly a 51% probability of a Federal Reserve rate hike in September, while the likelihood of rates remaining unchanged has fallen to about 23%.

For bullion markets, the interplay between geopolitical uncertainty, energy prices and monetary policy expectations is likely to remain the dominant theme. While safe-haven demand continues to underpin gold, any surprise in inflation data or a shift in the Federal Reserve’s policy outlook could determine whether the metal extends its rally or faces renewed selling pressure.