Gold loans are thriving in India
Hello, I am Priyanka Salve, writing to you from Singapore.
Welcome to the latest edition of Inside India, your one-stop destination for stories and developments from the world’s fastest-growing major economy.
This week, I will explain the reason for the rapid increase in gold loan growth in the world’s second largest bullion market. Gold-backed loans are a multibillion-dollar industry in India, powered by households holding $5 trillion in bullion.
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Indian families are sitting on a mountain of gold.
They own more than 34,000 tonnes of the yellow metal, according to a Morgan Stanley report in October last year, and Kotak Mahindra Bank estimates the value of this metal at around $5 trillion.
This huge reserve currently powers one of India’s fastest-growing credit segments. While other types of consumer lending have slowed, gold loans have increased due to tighter banking rules for unsecured loans, a sharp rise in global gold prices, increased access and perhaps increased financial stress among households.
Nearly 90% of Indian households While hoarding remains dormant, gold-backed loans are starting to reshape India’s retail lending landscape, even attracting some global investors, according to Shripad Jadhav, business head of gold loans at Kotak Mahindra Bank.
Global private equity firm Bain Capital has made a bold bet on credit against gold by planning to acquire up to 41.7% stake in Manappuram Finance, India’s second largest gold loan provider.
Agreement, approved The Reserve Bank of India’s announcement last month shows how international investors see the opportunity in the country’s most traditional but underutilized asset.
In December last year, Japanese financial giant MUFG announced that it had acquired a 20% stake in Indian shadow banking company Shriram Finance, which plans to double its loans against gold.
RBI data shows gold loans more doubled Within a year, it rose to 4 trillion rupees ($43.3 billion) in January from 1.75 trillion rupees the previous year. Gold-backed loans have now become the largest personal loan segment and the fastest growing personal loan category in the country after housing and vehicle loans.
Yan Wang, chief emerging market strategist at Canadian firm Alpine Macro, said the actual size of gold loans in India is estimated to be 14 trillion rupees, adding that the RBI data only covers personal gold loans from certain commercial banks.
According to last month’s Macquarie report, non-banking financial companies, or NBFCs, account for 45% to 50% of gold loan volume; this report is not handled by the RBI.
Gold rush
India’s central bank is tightening rules on unsecured lending in late 2023, cutting off access to that line of credit for many small and private business borrowers, Hanna Luchnikava-Schorsch, head of Asia-Pacific economics at S&P Global Market Intelligence, told me.
“Growth in personal loans has slowed from an average of 30% in the six months to December 2023 to 12.2% in 2025,” he said. During the same period, global gold prices also started to rise.
From 2024 to today, gold It has surged more than 140%, surpassing $5,000 per ounce and breaking many records this year.
Higher gold prices increase the value borrowers can achieve with the same amount of the metal, making gold loans more attractive, Luchnikava-Schorsch said.
Historically, demand for loans against gold has been driven by the semi-urban market among South Indian states and especially farming communities, experts said.
This growth is now broad-based across India, as middle-class and high-net-worth individuals in major cities use gold loans to meet their time-sensitive financial needs, says Kotak Mahindra Bank’s Jadhav.
NEW DELHI, INDIA – OCTOBER 18: People buy gold and silver jewelery on the occasion of Dhanteras from PP Jewellers, Karol Bagh in New Delhi, India on October 18, 2025.
Hindustan Times | Hindustan Times | Getty Images
The biggest beneficiaries of this demand for gold loans were NBFCs. Manappuram Finance and industry leader Muthoot Finance. Its shares rose 24% and 47% respectively last year, outperforming the Nifty 50 index by a large margin.
“Most NBFCs can disburse the loan within an hour of a customer entering the branch,” said Shreya Shivani, NBFC analyst at Nomura.
He said even a person with good quality gold and a “low” credit score can get a loan at a much better lending rate compared to unsecured personal loans. While this expands access to credit, it also raises questions.
A rapidly growing credit segment that bypasses traditional credit evaluations may indicate stress in the economy; Macquarie’s report also lists people feeling financially tight and incomes not keeping up with costs among the reasons that triggered the boom in gold loans.
Shripad says the rise in gold loans is “an indicator of financial maturity” as people make money from the precious metal and use it as a hassle-free, fast and low-cost line of credit.
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