High gold prices, surge in secured credit demand and regulatory streamlining key drivers
FinTech BizNews Service
Mumbai, 22 January 2026: Assets under management (AUM) of non-banking financial companies (NBFCs)1 specialising in gold loans is set to log a compound annual growth rate (CAGR) of ~40% between this fiscal and next, surpassing Rs 4.0 lakh crore by March 2027 (refer to chart in annexure).
The surge will be driven by elevated gold prices, a shift towards secured credit and an evolved regulatory environment, outpacing the CAGR of 27% clocked between fiscals 2023 and 2025.
Gold prices soared ~68%2 in the first nine months of this fiscal to an all-time high. This enhances collateral values, enabling lenders to scale up disbursements. Furthermore, amid limited availability of credit from segments such as unsecured lending, borrowers are looking out for other sources of funding. To capitalise on these lending opportunities, gold-loan NBFCs (both large3 and mid-size ones4) have been expanding their market presence, despite stiff competition from Banks.
Says Aparna Kirubakaran, Director, Crisil Ratings, “Large gold-loan NBFCs, having an established brand image, are scaling up their portfolio across existing branches. Meanwhile, their mid-sized counterparts are adopting a dual strategy of expanding their branch network as well as operating as originating partners for large NBFCs and banks. These efforts, combined with strong demand amid elevated gold prices, have boosted business per branch for gold-loan focused NBFCs by ~40% over the last two fiscals. Their average AUM per branch stood at ~Rs 14 crore in the first six months of this fiscal compared to ~Rs 10 crore in fiscal 2024”.
On the regulatory front, streamlining of loan-to-value (LTV) norms for lower-ticket size gold loans, applicable from April 1, 2026, is expected to provide additional headroom to NBFCs for lending.
In an earlier press release dated June 13, 20255, we had highlighted the potential benefits of permitting higher LTV of 85% and 80% (vs 75% earlier) for bullet repayment loans with ticket size of Our analysis indicates the LTV for lower-ticket size bullet loans could potentially increase from 65-68% currently to ~70- 75% following the implementation of the revised LTV norms, even after factoring the accrued interest as per revised LTV computation guidelines. The combined effect of elevated gold prices and revised LTV norms will enable borrowers to avail of more credit against the same quantity of gold, thereby increasing the attractiveness of gold loans. Says Prashant Mane, Associate Director, Crisil Ratings, “Demand for gold loans is also being underpinned by a shift among borrowers from unsecured to secured credit. Following asset quality challenges in the unsecured lending space, which was followed by stringent underwriting practices adopted by lenders and stricter regulatory actions, credit availability through this route declined substantially. Against this backdrop, gold loans have emerged as a strong alternative credit source, offering ease of availability, quick turnaround and flexible repayment options’’. While the growth trajectory remains buoyant, effective management of inherent risks will be key to support sustainable scaling up. A surge in demand and disbursements at higher LTVs will ultimately lead to lower cushion to manage gold price fluctuations. Therefore, keeping track of LTVs on a mark-to-market basis and maintaining discipline on auctions will be the key, especially in case of any sharp fall in gold prices. Furthermore, gold-loan NBFCs will need to maintain strict control on risk management and operational procedures including purity assessment, weightage measurement and authenticity evaluation of the pledged gold. Additionally, periodic internal audits at the branch level will be essential to prevent surprises at the auction stage. A crucial aspect of the growth story of gold-loan NBFCs is managing competition. Over the years, these NBFCs have carved out a niche by strengthening internal policies, improving underwriting capabilities and expanding to both prime and non-prime locations. With banks also intensifying presence in the gold loan space, the ability of gold-loan NBFCs to sustain growth momentum while managing competition will bear watching.
