Gold loan market heats up as new players plan massive branch expansion

Competition in India's gold loan market is rising, with new players set to add around 3,700 branches in 2026-27. They are targeting North, West, and Central India, challenging the dominance of established lenders in these regions.

Intensifying Competition and Branch Expansion

Competition in India's gold loan market is set to intensify as new players plan to add around 3,700 branches in 2026-27, more than double the roughly 1,500 branches added in the previous year, while expanding into states where traditional gold financiers have a smaller presence, Jefferies said in a report.

The expansion by new players, which currently account for about 18 per cent of non-banking finance companies' retail gold loans, would be equivalent to around 20 per cent of the branch network of the top four gold-focused NBFCs, the brokerage said.

Focus on New Markets

The report said new entrants are increasingly targeting North, West and Central India, particularly Rajasthan, Gujarat, Uttar Pradesh, Maharashtra and Madhya Pradesh. These markets have traditionally had a stronger presence of unorganised gold lenders and are areas where established players are not as dominant as in southern India.

Strong Market Growth

Gold loan growth, meanwhile, remains strong despite some moderation as gold prices stabilised. Retail loans against gold jewellery grew 80 per cent year-on-year in July 2026, while gold loans including agricultural gold loans rose 50 per cent to Rs 18.6 trillion, accounting for 11 per cent of retail credit, according to the report.

Jefferies said the market is also becoming more mainstream, with the share of prime and above-prime customers rising from 43 per cent in 2022 to 52 per cent in 2025.

Impact on Pricing and Lender Strategies

So far, increased competition has had limited impact on pricing, but some lenders are offering attractive rates to acquire customers in selected markets. Established lenders have widened their product offerings across loan sizes and loan-to-value ratios to retain customers.

The report noted that new branches typically have an initial operating expense-to-assets ratio of 6-8 per cent, compared with 2.5-3.7 per cent for established players, with new branches targeting break-even in about 18 months. This could limit the scope for aggressive rate cuts in the near term.

Future Outlook

“Gold prices stay the bigger driver for AUM growth,” Jefferies said, noting that higher gold prices can increase the value of collateral available for loans. The brokerage expects competition to rise as branch expansion gathers pace, while established lenders could retain an advantage through execution, customer trust and wider product offerings. (ANI)

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