Gold Financiers Are Growing Fast, Chasing India's Untapped 90%

Indian households own an estimated 34,600 tonnes of gold. That's worth close to 89% of the country's entire GDP, more than three times what households hold in equities. Yet only 9-10% of that gold has ever been used as collateral for a loan. The rest just sits in lockers, doing nothing. That gap between what could be used and what actually gets used is the whole growth story behind India's gold loan industry and it explains why so many lenders keep entering this space even as it gets more crowded.

NBFCs that focus on gold loans have grown fast chasing that gap, with their books expanding at a 55% annual pace between FY24 and FY26. Industry watchers expect this to continue, projecting around 40% annual growth through FY27 that would take the sector's assets to roughly INR 4 trillion, faster than the 27% growth seen in the two years before. Two things are driving this. First, gold prices rose sharply, touching an all-time high near USD 5,400 an ounce in January 2026, pushed up by central bank buying, a weaker dollar and global uncertainty. When gold gets more expensive, people can borrow more against the same jewellery they already own. Prices then fell about 25%, before rising again by 15% in August. That swing is worth noting, since it shows how much of this growth comes simply from gold getting pricier rather than more gold being pledged. Second, unsecured personal loans have become harder to get, pushing more borrowers, especially self-employed people and small business owners, toward gold loans instead.

Regulators have also been active, and this is where it gets interesting. From April 2026, the maximum amount lenders can offer against gold went up to 85% of gold value for smaller loans and 80% for slightly larger ones. That sounds like good news for borrowers. But there's a catch. The new rules also require lenders to include unpaid interest while calculating this limit, not just the loan amount. Once you factor that in, the real borrowing limit works out closer to 72%, barely different from the earlier 75% cap. In other words, the headline number changed, but the actual amount most people can borrow barely moved. It makes you wonder how many borrowers even notice the difference.

Competition is another theme worth watching closely. Banks still hold about 51% of the organised gold loan market, with NBFCs holding the remaining 49%. But several other NBFCs that had little presence in gold loans until recently have now entered this business, drawn by how safe it is. More lenders chasing the same customers is already putting some pressure on the interest rates lenders can charge, even as the total amount being lent keeps rising. That's a strange mix worth thinking about. A business getting more competitive while still staying fairly safe for lenders, at least for now.

Why does it stay safe? Because of the collateral itself. Gold doesn't lose value overnight, it's easy to price, and if someone fails to repay, lenders can sell the gold quickly, unlike trying to sell a house or a car. This is a big reason why gold loan NBFCs are expected to keep earning healthy returns, in the range of 4.25-4.5% on their assets through FY27, supported by steady demand and low bad-loan levels.

Here's a question worth thinking about, though. What happens to this growth story if gold prices simply stop rising for a couple of years? Much of the recent growth has come from rising prices, not from more people actually pledging their gold. Take that support away, and growth will depend on something far harder, which is convincing more Indians to finally put that unused 90% of their gold to work.

By Srishti Mendiratta | SEBI-Registered Research Analyst – INH000024295

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