Why India's banks are betting big on gold loans

Mon Aug 10 2026

For decades, India's gold loan business belonged almost entirely to specialist lenders such as Muthoot Finance and Manappuram Finance. If you wanted to pledge your jewellery for a quick loan, you rarely thought of walking into a bank.

That is changing rapidly.

Banks are making an aggressive push into gold loans as demand for credit backed by jewellery surges, turning one of India's oldest household assets into one of the country's hottest lending businesses. The shift comes as gold prices hover near record highs, borrowers seek faster access to cash and lenders increasingly favour secured loans over unsecured credit.

Outstanding gold loans extended by non-banking financial companies (NBFCs) climbed 69.3% year-on-year to Rs 3.41 lakh crore in June 2026, according to Reserve Bank of India data. During the same period, overall NBFC credit grew 14.4%, underlining just how much faster gold-backed lending is expanding than the broader lending market.

Banks are witnessing a similar trend.

Loans against gold jewellery at scheduled commercial banks nearly doubled over the past year, making them one of the fastest-growing categories within personal loans, according to RBI data. The rapid growth has prompted lenders to expand their gold loan business at a time when growth in unsecured personal loans has moderated following tighter regulatory scrutiny.

RISING POPULARITY OF GOLD LOANS

Unlike a personal loan, where approval depends largely on a borrower's income and credit history, a gold loan is backed by jewellery pledged as collateral. That reduces the lender's risk and usually allows loans to be sanctioned much faster.

For borrowers, rising gold prices have made the proposition even more attractive.

Take a family that owns gold jewellery worth Rs 5 lakh. A year ago, the same jewellery would have fetched a smaller loan. Today, with gold prices significantly higher, it can unlock more money without the family having to sell an asset that often carries both financial and emotional value.

That has made gold loans a preferred option for many households facing temporary cash needs—whether it is paying a hospital bill, meeting education expenses, funding a small business or bridging a short-term cash-flow gap.

The Reserve Bank of India has also taken note.

In its latest Financial Stability Report, the central bank said gold-backed loans have emerged as the fastest-growing segment within non-housing retail credit, expanding at a compound annual growth rate of 42.4% since March 2024. While acknowledging the strong growth, the RBI also cautioned lenders to strengthen underwriting standards, warning that a sharp fall in gold prices could erode the value of collateral.

The changing dynamics are also redrawing competition in the lending market.

For years, specialist gold financiers built their business on speed. Customers could walk into a branch with jewellery and walk out with a loan in less than an hour. Banks are now trying to match that convenience by expanding dedicated gold loan counters, investing in gold-testing equipment and streamlining approvals, according to recent industry reports.

The boom, however, raises a bigger question.

Are more Indians borrowing against gold because households are under financial stress, or because gold has become a smarter financial asset to borrow against?

The answer is likely a combination of both. High gold prices mean families can raise more money against the same jewellery, while tighter norms on unsecured lending have made collateral-backed loans attractive for banks and borrowers alike.

For lenders, the message is unmistakable. A business once dominated by specialist financiers is becoming mainstream banking.

For millions of Indian households, the jewellery locked away in cupboards and bank lockers is no longer just a store of wealth or a family heirloom. It is increasingly becoming a financial safety net—one that banks are now eager to lend against.

Source: https://www.indiatoday.in/