The number of gold loans has increased dramatically in recent years. The organised gold loans offered by banks and non-banking financial organisations (NBFCs) are expected to surpass Rs 10 trillion in the current financial year, according to a recent ICRA research. By March 2027, this amount is expected to have increased to around Rs 15 trillion, according to the research.
The study highlights banks’ leading position in the industry, which is mostly attributable to agricultural loans secured by gold jewellery. Concurrently, NBFCs are in the lead in retail gold loans and are expected to grow by 17–19% in 2025. The competitive pressure is slightly lessening, although NBFCs are still seeing some increase in their loan yields. Their yields are expected to remain, nonetheless, 200–300 basis points below the high levels recorded 4–5 years ago.
According to data made public by the Reserve Bank of India (RBI), loans secured by gold jewellery have increased significantly by 29% as of July of this fiscal year. When compared to the 6.7% growth noted over the same time in the previous fiscal year, this is a significant increase. Compared to the 16.5% rise recorded in the same period last year, the loan segment related to gold jewellery has increased by 39% year over year in the 12 months before July.
According to the research, during the fiscal year 2020–2024, organised general lending (GL) grew at a compound annual growth rate (CAGR) of 25%. This growth was primarily driven by banks, who increased loan volume at a faster pace of 26%, while NBFCs increased loan volume at a slower rate of 18%.
While their retail GLs expanded by 32% on a lower base, bank gold loan growth was driven by farm loans backed by gold jewellery, which grew at a CAGR of 26% between FY2020 and FY2024. As a result, the percentage of NBFCs—which were mostly concentrated on retail GLs for consumption or commercial purposes—decreased at this time.
The percentage of the total GL that was held by public sector banks (PSBs) increased from 54% in March 2019 to around 63% in March 2024, with the shares of NBFC and private banks declining proportionately throughout this time. However, over the past three to four years, the NBFCs have maintained a steady proportion of the retail GL. ICRA estimates that NBFC GL would increase at a CAGR of 14–15% in FY2026–FY2027, after expanding at a rate of 17–19% in FY2025.
NBFC GL growth trends have been influenced by microfinance, unsecured business, and personal loans. However, with intensifying headwinds for unsecured loans and buoyant gold prices, NBFC GL book growth revived in FY2024 and is expected to continue into FY2025. Gold loan growth in NBFCs has been modest, with 3-4% growth in branches and gold jewellery tonnage. As of March 2024, the top four players command an 83% market share.
NBFCs have somewhat alleviated yield pressures in FY2024, but yields remain 200-300 basis points lower than in FY2020/FY2021. Credit costs have remained low, and collateral availability and liquidity mitigate credit risk. Gold loan companies have a healthy growth outlook, low credit costs, and improved pricing power. However, improving operational efficiencies is crucial for strengthening earnings performance.
The ICRA report predicts gold loans from banks and NBFCs could surpass ₹10 lakh crore this fiscal year, highlighting the growing reliance on gold as a financial asset. Gold loan platforms like SahiBandhu play a crucial role in bringing unorganised lending customers into the organised sector.
