Gold Loans to Surge Past Credit Growth: Ind-Ra
By ThePip Desk
India Ratings predicts bank gold loans will grow significantly faster than overall credit, driven by rising gold prices and banks’ focus on secured lending.
Bank gold loans are projected to continue their rapid expansion, outstripping the overall banking system’s credit growth in the medium term, according to India Ratings and Research (Ind-Ra).
This substantial growth stems from appreciating gold prices, increased household borrowing capacity, and banks’ strategic focus on secured lending products.
Gold Loan Surge and Market Landscape
In FY26, bank gold loans demonstrated a remarkable year-on-year growth of nearly 45%. This figure is approximately 2.7 times the broader banking system’s credit growth, which stood at 16.7% for the same period.
Presently, gold loans comprise 6.9% of the total banking credit in India.
As of March 2026, the gold loan market was valued at a staggering ₹18.6 lakh crore. Banks hold a dominant market share in this segment.
Key market share figures highlight the banking sector’s prominence:
Banks: approximately 75% of the market.
Non-bank finance companies (NBFCs): approximately 12% market share.
Underwriting and Risk Management
Banks maintain a cautious approach to gold lending, characterized by conservative underwriting and strict loan-to-value (LTV) practices. This contrasts with some NBFC strategies.
Agricultural lending remains a critical component, accounting for roughly two-thirds of banks’ gold loan portfolios in FY26. Retail gold financing, however, is anticipated to see further growth.
Ind-Ra highlights that banks typically cap LTVs at 80%, even for agricultural and income-generating loans (IGLs), showcasing a prudent risk management framework. Some NBFCs have adopted more aggressive origination strategies for IGLs, which may introduce higher collateral and credit risks.
Future Outlook and Co-lending
The recent harmonization of gold loan regulations is expected to facilitate more co-lending partnerships between banks and NBFCs. This collaboration would allow each entity to leverage their respective strengths in funding, underwriting, and distribution, particularly within the IGL segment.
Despite the rapid expansion, credit risks within bank gold loan portfolios are projected to remain manageable. This stability is attributed to their inherent resilience and robust collateral coverage.