Rama Krishna Sangem
An increasing number of people are escalating their gold loans. Both the scheduled banks and non-banking finance companies (NBFCs) are witnessing a flood of renewal and escalation of existing gold loans, so that the borrowers get more money out of their already pledged jewelry and ornaments. This way, they get about 50-60 per cent more of their present loan by cash.
This spurt in gold loans is driven by a combination of rising gold prices, tightening regulations on unsecured lending, and increased demand for quick, accessible funds during economic uncertainty. The gold loan market in India is expected to continue its strong growth, driven by a growing organized sector and innovative digital services.
Surging gold prices: Gold prices have been on a sharp upward trend due to global geopolitical tensions and economic instability. This increases the value of borrowers’ gold collateral, allowing them to secure larger loan amounts for the same quantity of gold.
Economic uncertainty: During periods of economic slowdown and financial distress, consumers and small businesses turn to gold loans for liquidity. Gold is viewed as a reliable “safe-haven” asset, and pledging it is often preferred over other options during a crisis.
Banks too love to give gold loans
Rising cost of unsecured loans: After the Reserve Bank of India (RBI) increased risk weights on unsecured loans in late 2023, personal loans and credit cards became more expensive and difficult to obtain. This regulatory change redirected many borrowers toward secured options like gold loans.
The organized gold loan market in India grew at a Compound Annual Growth Rate (CAGR) of about 26% during FY2024 and FY2025. Market size projections: Credit rating agency ICRA projects the organized gold loan market will reach Rs 15 trillion by March 2026, a year earlier than previously expected.
Dominance of banks: Public sector banks remain the largest players in the gold loan space, with an 82% market share as of March 2025. This growth is driven largely by agricultural and other gold-backed loans. NBFC expansion: NBFCs are also a major force in the market and are expected to continue expanding their gold loan Asset Under Management (AUM) by 30–35% in FY2026.
