India's Gold-Financing Industry Poised for Strong Growth Amid Elevated Prices and Tighter Credit

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

The report highlights that Indian households hold an estimated ~34.6k tonnes of gold, equivalent to ~89% of India's GDP and ~3.1x household equity holdings. However, only ~2.95-3.35k tonnes of this stock is currently pledged as collateral.

Elevated gold prices and tighter access to unsecured credit have driven gold non-banking finance companies (NBFCs) to a ~55 per cent AUM CAGR during FY24-26. The report notes that the large pool of unpledged household gold represents 'a large addressable pool that banks and NBFCs can bring into the organised lending ecosystem.'

Gold prices have been supported by higher import duties and restrictions, with the yellow metal trading at around Rs 4,396.60. The report forecasts that AUM of NBFCs specializing in gold financing will grow at a ~40% CAGR over FY25-27E to reach INR 4trn by FY27E.

The growth outlook for gold financiers is further strengthened by the shift towards secured credit and an evolving regulatory environment. Tighter access to unsecured credit has pushed borrowers towards alternative funding, benefiting gold-loan NBFCs despite rising competition.