Indian Gold Loan Market Surges as Banks Challenge NBFC Dominance

The Indian gold loan market has experienced a significant shift as credit demand tied to jewellery assets scales rapidly. Outstanding gold loans held by non-banking financial companies (NBFCs) jumped 69.3% year-on-year, reaching Rs 3.41 lakh crore in June 2026.

This growth is fueled by gold prices hovering near record highs, increasing the loan eligibility for borrowers without forcing them to sell their assets. For years, specialist lenders like Muthoot Finance and Manappuram Finance dominated this space. However, traditional commercial banks are now aggressively expanding their gold loan portfolios.

Banks are pivoting toward gold-backed lending, which is viewed as a safer, secured asset, due to increased regulatory scrutiny on unsecured personal loans. To compete with the convenience offered by NBFCs, banks are investing in branch-level appraisal technology, successfully reducing loan approval and disbursal times to between 15 and 30 minutes.

The rapid expansion of this segment comes with distinct challenges that investors should monitor. The Reserve Bank of India (RBI) has recently issued cautions regarding the rapid pace of expansion in retail credit, including gold loans. A primary concern for regulators is collateral value, as a sharp correction in bullion prices could erode the value of the security held by lenders.