PSU banks dominate gold loan market, NBFCs lead in borrower volume

PSU banks now hold nearly 60% of India's gold loan market value, focusing on high-value loans. In contrast, NBFCs lead in borrower volume with smaller-ticket loans, highlighting a two-track market structure, a new report reveals.

Public sector (PSU) banks have further consolidated their dominance in India's gold loan market, even as gold-loan-focused non-banking financial companies (NBFCs) steadily expand their presence in terms of borrower volumes, according to CRIF High Mark's latest CreditScape: Gold Loans in India report on Wednesday. As of November 2025, PSU Banks accounted for nearly 60% of the total gold loan portfolio outstanding, strengthening their leadership position over the past two years. Their growing share reflects a strategic tilt towards secured lending, as banks prioritise strong collateral amid elevated gold prices and a cautious broader credit environment, the report said.

PSU Banks vs. NBFCs: A Divergent Approach

In contrast, gold-loan-focused NBFCs, while holding a smaller 8.1% share of portfolio outstanding, commanded a significantly higher 16.6% share of active gold loan accounts. This divergence highlights a clear split in business models: PSU Banks are increasingly skewed towards higher-value loans, while NBFCs continue to dominate smaller-ticket, high-volume lending.

Market Growth Driven by Higher Loan Values

The report notes that overall gold loan portfolio outstanding surged 41.9% year-on-year in November 2025, far outpacing growth in total retail and consumption loans. However, the number of active gold loan accounts grew by just 10.3%, underscoring that growth is being driven more by larger loan sizes rather than new borrowers.

Shifting Competitive Landscape

Private sector banks, meanwhile, saw a gradual erosion in both value and volume share, squeezed between PSU Banks' balance sheet strength and NBFCs' operational agility. Analysts attribute this shift to PSU Banks' ability to fund large-ticket loans at lower costs, while NBFCs leverage specialised gold loan operations, faster processing, and deeper penetration in semi-urban and rural markets.

Asset Quality Shows Marked Improvement

Despite rapid expansion, asset quality across lender types has improved. Early-stage delinquencies declined across the board in 2025, supported by rising gold prices and strong recovery mechanisms. PSU Banks reported some of the lowest levels of late-stage delinquencies, while gold-focused NBFCs showed sharp improvement in early delinquencies, reflecting tighter underwriting and portfolio monitoring.

Future Outlook: Regulation and Market Structure

With new RBI guidelines on gold loans, introducing differentiated loan-to-value norms and tighter processes for smaller-ticket loans, set to be fully implemented by April 2026, industry experts expect competitive dynamics between banks and NBFCs to intensify further. As gold loans cement their role as one of the fastest-growing segments in retail credit, the market appears headed towards a two-track structure: PSU Banks deepening their hold on high-value loans, and NBFCs expanding reach through volume-led growth at the bottom of the pyramid. (ANI)

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