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

India's gold-financing sector is set for strong growth driven by elevated gold prices and tighter access to unsecured credit, according to a report by Antique Stock Broking.

The report notes that India's gold-financing market, valued at Rs 18.6 trillion, remains 'structurally underpenetrated.' With only ~2.95-3.35k tonnes of the estimated ~34.6k tonnes of household gold currently pledged as collateral, just ~9-10% of household gold is formally monetized.

The large pool of unpledged household gold represents a significant addressable market for banks and non-banking finance companies (NBFCs) to tap into. The report highlights that the value of India's annual gold consumption has been steady at ~750-840 tonnes, supporting higher loan ticket sizes and AUM growth for gold financiers.

Gold prices have been driven up by elevated levels and tighter access to unsecured credit, which is pushing borrowers towards alternative funding sources. The report notes that the government's recent measures to curb gold imports, including an increase in the gold import duty to ~15% from ~6%, have further supported gold prices.

According to the report, the AUM of NBFCs specializing in gold financing (entities with 50%+ of AUM in gold loans) is expected to grow at a ~40% CAGR over FY25-27E to reach INR 4trn by FY27E, outpacing the ~27% CAGR recorded over FY23-25.