Sustained demand amid an increase in costs of treasured metallic and the crackdown on unsecured loans like private loans contributed to the surge in gold loans, bankers and mortgage finance executives mentioned. The reclassification of among the agriculture loans as gold loans by a couple of banks in Might 2024 following the central financial institution’s directive additionally lifted the numbers in FY25, bankers mentioned.
The precise quantum of this reclassification couldn’t be ascertained. Normally, surge in gold costs appears to spur borrowing towards jewelry.
Gold mortgage development surged in FY25 as lenders capitalised on the postCovid momentum, leveraging their intensive networks to faucet right into a largely unorganised and high-cost market, mentioned Sanjeev Nautiyal, managing director at Ujjivan Small Finance Financial institution.
“The sustained improve in gold costs has naturally enhanced the borrowing potential for patrons, making gold loans a extra engaging possibility,” mentioned CSB Financial institution managing director Pralay Mondal. He added that the Kerala-based lender has witnessed a transparent shift in clients from the unorganised lending sector to the formal banking system, pushed by the current regulatory tightening round unsecured lending in segments like private loans and microfinance.
In accordance with Ajay Kumar Srivastava, MD at Indian Abroad Financial institution, the zero-risk gold mortgage the place lenders see hardly any slippage is an computerized alternative for development. “It’s within the DNA, particularly for south-based banks. There are after all some issues on the applicable degree since many new gamers have forayed within the sector, creating potentialities of mis-sell,” he mentioned. Between March 2020 and March 2025, gold loans elevated at a CAGR of 44%, as gold costs rose at 17% annual price. In absolute phrases, gold costs are up 122% in these 5 years.
Gold mortgage portfolio rose from Rs 33,257 crore in March 2020 to Rs 208,735 crore in March 2025, RBI knowledge exhibits. In the identical interval, gold costs went up from Rs 38,600 per 10 gm to round Rs 85,800 per 10 gm, in response to trade knowledge.
Nevertheless, there are exceptions. As an illustration, in FY21 in the course of the Covid pandemic, whereas gold costs rose solely 3%, gold loans surged 128% as wage and employment losses pressured debtors to pledge their gold for money.
RBI knowledge exhibits banks’ gold loans share in complete retail credit score rose to three.5% in March 2025 from 1.2% in March 2020. Related development has additionally been noticed at non-banking finance firms. The excellent gold loans of the NBFC sector is estimated at about Rs 2 lakh crore, trade executives mentioned.
Analysts mentioned in FY25, the expansion was primarily led by worth (as greater gold allowed debtors to take out extra loans) and never essentially by quantity. Gold mortgage clients are sometimes repeat debtors. Sometimes, when gold costs improve, such clients shut the present mortgage and go for a brand new mortgage as a result of the identical quantity of gold fetches extra. The loan-to-value, worth of mortgage in contrast with the underlying collateral, is capped at 75%.
In accordance with the World Gold Council, the sharp rise in gold value led to a 25% year-on-year fall in gold jewelry demand in India in January-March of this 12 months. Nevertheless, the identical demand for gold loans continued to surge. It’s because gold jewelry is pledged as collateral — as shoppers sought to leverage the excessive gold value, WGC mentioned. Lenders have additionally been pushing gold loans extra as it’s thought of secure lending. Nation’s largest lender State Financial institution of India’s gold mortgage e book rose 53% YoY to Rs 50,011 crore at finish of March.
Muthoot, a specialised gold finance firm, noticed property below administration, crossing Rs 1 lakh crore as on March 13 in contrast with Rs 92,964 crore as the tip of December.
Gold loans expanded 35% yearon-year for CSB and accounted for 44% of its complete portfolio Rs 31500 crore. The financial institution’s unsecured loans contribute merely 3.4% of the entire portfolio. “This (gold mortgage) section traditionally reveals low delinquency ranges, and the quick tenure nature of those loans permits for environment friendly threat administration. These elements collectively present vital consolation to banks like ours, enabling us to assist this section with confidence and prudence,” mentioned CSB Financial institution’s Mondal.
Banks like Ujjivan SFB, which have been attempting to lift the share of the secured e book have began exploring the gold mortgage market. For Ujjivan, FY25 marked the primary full 12 months of operations for the gold mortgage vertical.