Gold Loans Surge 4.4x, Gain Share in Personal Credit Amid Slower Unsecured Growth

Gold loans have surged more than fourfold in two years. This is due to rising gold prices and relaxed Reserve Bank of India norms that allow borrowers to take larger loans against their jewellery, particularly for smaller-ticket borrowing.

Loans against gold jewellery rose 4.4 times to ₹5.52 lakh crore in July 2026 from ₹1.24 lakh crore in July 2024, according to RBI data collated by Moneycontrol. The outstanding amount stood at ₹2.06 lakh crore in July 2025.

How Gold Loans Changed the Composition of Personal Lending

Gold loans accounted for just 2.2% of total personal loans in July 2024. Their share more than doubled to 4.8% in July 2025 before climbing further to 7.7% in July 2026.

In contrast, the combined share of education, consumer durable, and credit-card loans declined from 7.7% in July 2024 to 7.4% a year later and further to 6.7% in July 2026.

Where Gold Loans Are Concentrated and Where Growth Is Spreading

Despite the rapid expansion, gold-backed borrowing remains heavily concentrated in southern India. The 5 southern states of Tamil Nadu, Andhra Pradesh, Karnataka, Telangana, and Kerala together accounted for more than 70% of the outstanding gold-loan portfolio as of June 2026, according to CRIF High Mark’s How India Lends report.

Tamil Nadu alone accounted for 30% of the portfolio, followed by Andhra Pradesh at 15.9% and Karnataka at 10.2%.

However, growth is becoming more dispersed geographically. Among the 10 largest states tracked by CRIF, Uttar Pradesh recorded the fastest year-on-year expansion at 122.8% as of June. West Bengal followed at 99.7%, Rajasthan at 91.2%, and Gujarat and Telangana at 80.5% each.

How RBI’s Revised LTV Norms Made Smaller Gold Loans More Attractive

The RBI’s new gold and silver collateral framework introduced a tiered loan-to-value structure for consumption loans. Under the revised rules:

• Lenders can provide loans of up to 85% of the value of pledged gold for total borrowing of up to ₹2.5 lakh
• The ceiling is 80% for loans above ₹2.5 lakh and up to ₹5 lakh
• Loans above ₹5 lakh remain capped at 75%

The higher LTV limit for smaller loans has made gold-backed borrowing more accessible for lower-ticket borrowers.

What PNB Said About Its Gold Loan Growth

Banks have stepped up their focus on the segment. PNB MD and CEO Ashok Chandra, asked in an August interview about the sharp expansion in Punjab National Bank’s gold-loan portfolio, said the bank had previously been a relatively small player in the business.

Clearer RBI guidelines have since encouraged more active participation.

The other major driver he cited was rising collateral value. Gold futures for October delivery on the Multi Commodity Exchange were trading at ₹1,52,511 per 10 grams on September 22.

Why Secured Lending Is Gaining Ground Over Unsecured Credit

The shift toward gold loans has also come as lenders grow more cautious about parts of the unsecured retail market. Unlike credit-card loans and most consumer lending, gold loans are backed by an asset that lenders can liquidate in the event of default.

Asset quality in the segment remains relatively comfortable. CRIF data show that loans overdue by 31 to 90 days accounted for 0.9% of the gold-loan portfolio in June, while another 0.3% was in the 91 to 180-day bucket and 0.2% was overdue by more than 180 days.

Final Outlook

Source: Moneycontrol