Gold Prices and Tight Credit Drive India's Gold-Financing Sector Growth

India's gold-financing sector is poised for growth due to elevated gold prices and tighter access to unsecured credit, according to a report by Antique Stock Broking. The industry's market value stands at Rs 18.6 trillion, with only around 9-10% of household gold being formally monetized.

The brokerage house estimates that India accounts for approximately 26% of global gold demand, with jewellery remaining the dominant form of consumption. However, retail investment demand for bars and coins has been rising steadily.

Elevated gold prices have driven growth in the sector, with non-banking finance companies (NBFCs) specializing in gold financing seeing a ~55 per cent AUM CAGR during FY24-26. The report notes that the underlying collateral pool is expanding due to steady gold consumption of around 750-840 tonnes annually.

The government's measures to curb gold imports, including an increase in import duty and a cap on imports, have also supported gold prices and growth prospects for gold financiers.