India's Gold Financing Sees Surge Amid High Prices and Tight Credit

India's gold-financing industry is experiencing strong growth due to elevated gold prices and tighter access to unsecured credit. The market, valued at Rs 18.6 trillion, remains underpenetrated, with only a small percentage of household gold being formally monetized.

A report by Antique Stock Broking estimates that Indian households hold around 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.

The large pool of unpledged household gold represents a significant addressable market for banks and non-banking finance companies (NBFCs) to bring into the organized lending ecosystem. With annual gold consumption steady at 750-840 tonnes, the underlying collateral pool is expanding, supporting higher loan ticket sizes and stronger AUM growth for gold financiers.

Elevated gold prices, which currently stand at Rs 4,396.60, and tighter access to unsecured credit are emerging as key catalysts for growth in gold financing. The AUM of NBFCs specializing in gold financing is expected to grow at a 40% CAGR over FY25-27E to reach INR 4 trillion by FY27E.

The government's recent measures to curb gold imports, including an increase in the gold import duty to 15% from 6% earlier and a cap on imports at 100kg per license, have further supported gold prices and aided growth prospects for gold financiers.