The gold loan market in India currently experiences a period of fundamental transformation. The lending product, which existed as a specialized option, has evolved into a vital component that drives secured credit growth for non-banking financial companies (NBFCs). The industry projects that gold-loan NBFC assets under management will reach a value exceeding ₹4 lakh crore by March 2027 , with retail lending segments experiencing slower growth rates.
This acceleration occurs because multiple factors combine together to create this effect. The current situation has developed because of higher gold prices and different borrower demands, regulatory changes, and decreased availability of unsecured credit, all of which impact the market. The combined effects of these forces create a new system that enables people and small enterprises to obtain short-term funding throughout India.
A Sharp Acceleration in Growth
According to recent assessments by rating agencies, gold-loan NBFCs are expected to record a compound annual growth rate of nearly 40 percent between FY25 and FY27. This marks a notable jump from the roughly 27 percent CAGR seen between FY23 and FY25. The lending product shows abnormal growth patterns because it cuts across established credit usage patterns in the industry.
One of the strongest tailwinds has been the sustained rally in gold prices. During the first nine months of the current fiscal year, gold prices rose by nearly 68 percent. For lenders, higher prices translate directly into stronger collateral coverage. For borrowers, it means they can unlock more liquidity from the same quantity of gold without selling it.
As a result, average ticket sizes have increased, loan renewals have risen, and customer engagement has deepened across both urban and semi-urban markets.
Why Borrowers Are Turning to Gold Loans
The renewed popularity of gold loans is closely tied to developments in the wider credit market. Over the past two years, lenders have tightened underwriting norms for unsecured products such as personal loans, consumer durable financing, and small business credit. This tightening follows rising stress levels in some unsecured portfolios and regulatory scrutiny around risk management.
Gold loans offer an advantage because they function as simple financial products. The loans need only basic paperwork for approval while providing fast loan approval without requiring extensive credit evaluation. Gold loans deliver quick financial solutions to borrowers who need immediate funds for medical costs or business operations or seasonal home expenses.
The advantage becomes most evident in rural and semi-urban regions of India. The NBFCs established their operational structure to effectively transform gold jewellery into financial assets which customers could use as their financial security.
Expansion Strategies of Gold Loan NBFCs
Leading gold-loan NBFCs are responding to demand by expanding branch networks, strengthening valuation processes, and investing in customer retention. Many mid-sized players are also pursuing co-lending and sourcing partnerships with banks, allowing them to scale without overextending their balance sheets.
Branch expansion remains a key lever. Several NBFCs have announced plans to add thousands of new outlets over the next two years, particularly in underpenetrated districts. These branches serve not only as origination points but also as trust centres, an important factor in gold-backed lending.
At the same time, technology adoption is improving operational efficiency. Digital gold valuation tools, centralised risk monitoring, and faster auction mechanisms are helping NBFCs manage growth without compromising asset quality.
Banks Are Competing Aggressively
While NBFCs are growing rapidly, banks continue to dominate the organised gold loan market in absolute terms. Estimates suggest that banks account for more than four-fifths of total organised gold loan outstanding, driven by their extensive branch networks and lower cost of funds.
Public sector banks, in particular, have increased their focus on gold loans linked to agricultural and personal credit needs. Competitive pricing and regulatory familiarity make banks formidable competitors, especially in regions where they already have strong customer relationships.
NBFCs, however, retain an edge in turnaround time and customer experience. In many cases, borrowers prefer NBFCs for faster processing, flexible repayment options, and specialised service—even if interest rates are marginally higher.
Regulatory Changes Are Adding Momentum
Upcoming changes to loan-to-value (LTV) norms are expected to further support growth. From April 2026, revised guidelines will allow higher LTV ratios for smaller ticket gold loans. For loans below ₹2.5 lakh, LTV ceilings may rise to around 70–75 percent, compared to earlier levels of 65–68 percent.
These changes give lenders additional headroom to increase disbursements while remaining within regulatory limits. However, higher LTVs also require tighter risk controls, particularly in periods of gold price volatility.
Managing Risks in a Fast-Growing Segment
Rapid growth always brings risk, and gold lending is no exception. A sharp correction in gold prices could compress collateral coverage, especially for loans issued at higher LTVs. To mitigate this, NBFCs actively monitor price movements and maintain disciplined auction timelines for delinquent accounts.
Operational risks also matter. Accurate assessment of purity and weight is fundamental, and errors at the branch level can quickly translate into financial losses. Most established players address this through training, audits, and standardised appraisal equipment.
So far, asset quality trends in the gold loan segment have remained stable, supported by the short-tenure nature of loans and borrowers’ strong emotional attachment to pledged jewellery.
What This Means for the Financial System
The expansion of gold-loan NBFCs adds depth to India’s secured lending ecosystem. At a time when unsecured credit is being reassessed, gold loans offer a relatively low-risk alternative that supports consumption, micro-enterprise activity, and household liquidity.
For borrowers, this growth improves access to formal credit without forcing asset sales. For lenders, it provides a scalable, collateral-backed product aligned with India’s unique household asset structure.
The Road Ahead
The gold-loan NBFCs will reach the ₹4 lakh crore mark by 2027 if current market conditions maintain their existing trajectory. The company needs to maintain its growth through three essential approaches, which include proper risk assessment and responsible business development, and ongoing financial support for risk management systems.
The modern financial system uses gold as an asset that people have used for centuries, because its value now exists in a different form. The NBFC sector will enter its next development stage, which will require companies to find effective methods to manage their business growth while maintaining their operational efficiency.
