Gold Loans shine: Even in weak credit growth, a tremendous jump of 124% was seen! These are the major reasons.

In recent times, credit growth in the Indian banking sector may have been slow, but there is one segment that has surprised everyone - gold loans. This loan product is growing rapidly and is attracting the attention of investors and financial organizations. Know the reasons behind this spectacular growth and its impact on banks and NBFCs.

The flow of credit in the Indian economy is essential for any development. But when traditional loan segments are growing at a slow pace, then the rapid growth of one segment really attracts attention. Gold loans are one such segment that has recently registered a tremendous jump, which has become a big opportunity for both banks and NBFCs.

Record-breaking growth in gold loans: June 2025 data

According to the latest data, gold loans have seen a year-on-year (YoY) growth of 124% till June 2025. This figure is particularly impressive when we compare it to other major loan categories:

Gold Loans: Massive growth of 124%
Credit Card Loans: Only 7% growth
Personal Loans: 9% growth

Last year too, gold loans were ahead of the rest of the loan segment, showing the continuity of this trend. These figures show that Indian consumers and small businesses are now increasingly turning to gold loans to meet their cash needs.

Why is the demand for gold loans increasing?

There are several major reasons behind this growth in gold loans:

Rising gold prices (Gold Price Appreciation)

Gold prices have been rising steadily over the past few years. When the price of gold increases, the value of the collateral (pledged gold) also increases. This allows borrowers to get a higher loan amount against their existing gold, making it an attractive option.

Growth from Semi-Urban and Urban MSMEs/Individual Borrowers

Most of the growth in gold loans is coming from micro, small and medium enterprises (MSMEs) and individual borrowers in semi-urban and urban areas.

Clarity from new gold loan guidelines

The recently released gold loan guidelines have provided more clarity to banks and financial institutions to operate in this segment. This has allowed them to expand their distribution network and push gold loan products with more confidence.

Gold availability and low NPAs in India

Gold is a readily available collateral in India. Almost every Indian household owns some amount of gold. This increases its acceptability. Also, gold loans have traditionally been a segment with low NPAs as the value of the pledged gold provides security for the loan amount. This encourages both banks and NBFCs to be more active in this segment.

NPA Status: Banks Vs NBFCs

The level of non-performing assets (NPAs) is important for the stability of any loan segment. In the case of gold loans, the situation of banks and NBFCs has been different.

Situation of banks stable

The percentage of gold loan NPAs for Scheduled Commercial Banks has remained stable. It increased marginally from 0.20% in March 2023 to 0.22% in March 2025. This indicates that banks are being cautious in disbursing gold loans and this segment remains relatively safe for them.

NPA pressure on NBFCs

However, the pressure of gold loan NPAs has increased in upper and mid-layer NBFCs. Their NPA was 1.21% in March 2023, which increased to 2.14% by March 2025. This increase can be a matter of concern for NBFCs and they need to reconsider their risk management strategies.

FAQs

Q1: How much growth has been seen in gold loans till June 2025?

A1: Gold loans have seen an annual (YoY) growth of 124% till June 2025.

Q2: How has the growth of gold loans been compared to other personal loans?

A2: Gold loans have seen a growth of 124%, while credit card loans have seen only 7% growth and other personal loans have seen 9% growth. This shows that gold loans are ahead of all others.

Q3: What is the status of gold loan NPAs for banks?

A3: Gold loan NPAs for scheduled commercial banks have remained stable at 0.22% as of March 2025.

Q4: What are the key drivers for the increase in gold loan demand?

A4: The key drivers for the increase in gold loan demand are rising gold prices (which has increased the collateral value), demand from semi-urban and urban MSMEs/individual borrowers, and clarity from the new gold loan guidelines.