India's gold loan market surges 3.8x to become 2nd largest credit

India's gold loan portfolio grew 3.8 times since March 2022, becoming the 2nd largest retail credit product at 11.1% of the total share. Growth is driven by higher adoption, larger ticket sizes, and increased lender participation.

India's gold loan portfolio grew 3.8 times since March 2022, officially becoming the country's second-largest retail credit product by balance share. According to TransUnion CIBIL's Gold Loan Landscape Report, gold loan balances now account for 11.1 per cent of India's retail credit portfolio, a significant increase from the 5.9 per cent share recorded in March 2022.

Gold Loan Market Sees Unprecedented Growth

This rapid expansion reflects a combination of rising borrower adoption, higher ticket sizes, and broader participation from various lending institutions. The report noted that the average gold loan balance per account increased from Rs 1.1 lakh in March 2022 to Rs 1.9 lakh by December 2025. Market activity saw a sharp rise as origination values grew 5.1 times over the same period, while origination volumes increased 2.3 times.

Structural Shift and Lender Participation

This growth was particularly visible among public sector banks, which saw their share of gold loan balances rise from 57 per cent to 62 per cent. Non-Banking Financial Companies (NBFCs) also expanded their footprint, increasing their share from 7 per cent to 11 per cent.

"Gold has always held deep financial and cultural relevance in India, but what we are seeing now is a structural shift in how gold-backed borrowing is being used," said Bhavesh Jain, MD and CEO of TransUnion CIBIL. "Gold loans are increasingly becoming a mainstream, organised and accessible form of secured credit. Their rapid growth reflects both lender confidence and rising consumer acceptance."

Evolving Borrower Profile

The profile of the typical gold loan borrower is also evolving toward a more credit-mature demographic. Prime and above-prime borrowers accounted for approximately 52 per cent of originations in 2025, up from 43 per cent in 2022. Simultaneously, women borrowers emerged as a critical driver of the market, representing 39 per cent of originations by volume in 2025. This demand moved beyond traditional southern strongholds, showing notable momentum in states such as Uttar Pradesh, Rajasthan, Maharashtra, and Madhya Pradesh.

"What is particularly notable is that the segment is drawing more borrowers with stronger credit profiles, larger ticket sizes and repeat usage. This is an indication that gold loans are no longer being used only for short-term liquidity needs but are becoming part of broader household borrowing behaviour," Jain noted.

Balancing Growth with Prudent Risk Assessment

Despite the upward trajectory, the report emphasised the need for sharper risk assessment. While overall delinquency was 1.1 per cent for loans originated in the first half of 2025, borrowers with outstanding balances exceeding Rs 2.5 lakh showed a higher delinquency incidence of 1.5 per cent. This rate is more than double that of borrowers with lower exposure. For a specific segment of stressed borrowers, the report suggests gold loans may be functioning as a product of last resort, with credit-access closure rates 1.6 times higher than non-defaulting peers.

"As the gold loan segment expands, lenders' priority must be to balance growth with prudence. Collateral strength remains important, but it cannot be the sole criterion for evaluating borrowers. Lenders will need to assess total borrower indebtedness, repayment capacity, recent credit behaviour and cross-lender exposure more holistically," Jain said. (ANI)

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