Gold loans surge in India as rising prices and smarter financing turn them from a last-resort debt into a booming trend among all wealth groups.
Meanwhile, smaller loans under Rs 1 lakh fell from 25.4% to 12.3%. Experian analysis shows loans above Rs 3 lakh now make up 56%, up from 44%, highlighting that gold-rich individuals are driving growth.The primary driver? Rising gold prices allow borrowers to secure higher amounts with smaller pledges. Higher loan-to-value ratios, easier processing, and branch expansion also contribute. Compared to riskier personal loans, gold loans are seen as safer and more attractive.Public sector banks currently dominate with 46% market share, but NBFCs are growing fast. Despite slightly higher interest rates, NBFCs attract borrowers with minimal paperwork, quick approvals, and instant processing.Looking ahead, gold loans are the fastest-growing segment in India’s retail lending, with a 44% increase bringing the total portfolio to Rs 16.1 lakh crore. Jefferies reports formal sector pledges now account for 7-8% of household gold. CRISIL Ratings notes significant growth in Uttar Pradesh (68%) and rapid expansion in Rajasthan and Telangana, while Kerala shows lower credit risk. Importantly, non-performing loans remain low despite the rising volume.
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Earlier, only small loans were taken by ordinary households to meet minor needs. Today, even high-net-worth individuals and business owners are pledging their gold, not selling it, to secure large loans for investments, business expansion, and other financial strategies. The notion that gold loans are linked to poverty is now outdated.
