Large private banks are aggressively expanding into gold lending, targeting higher-ticket loans and intensifying competition in urban markets. A report highlights this trend, noting their growing market share against traditional NBFCs and public banks.

Large private banks are stepping up investments in gold lending and could gain market share in higher-ticket loans as strong growth, attractive returns and rising customer acceptance make the segment increasingly competitive, according to a Motilal Oswal Financial Services report.

Legacy Challenges and Competition

The report said private banks have historically had a limited presence in organised gold lending because building a profitable business requires upfront investment in specialised branches, trained gold valuers, secure vaulting facilities and operating systems. This also results in a longer payback period compared with several other retail lending products. Gold-loan NBFCs and public sector banks have an advantage in rural and semi-urban markets through wider branch networks, faster turnaround, simpler documentation and established customer relationships. NBFCs also cater to some semi-formal borrowers who may not qualify under conventional bank underwriting frameworks, the report said.

Renewed Focus on Gold Loans

However, rapid growth in gold loans, attractive risk-adjusted returns, low credit costs and increasing customer acceptance are prompting large private banks to expand their operations through dedicated branches, specialised teams, digital sourcing and process automation. “Over the medium term, this is expected to intensify competition, particularly in urban and higher-ticket segments,” the report said, while noting that specialised gold-loan NBFCs are likely to retain an advantage in rural markets and among customers seeking speed, flexibility and service.

Expansion Visible in Loan Books

The expansion is already visible in the loan books of several private banks. HDFC Bank's gold loan portfolio rose 34 per cent year-on-year to Rs 237 billion in FY26 and stood at Rs 255 billion in June 2026, up 8 per cent quarter-on-quarter. Axis Bank's portfolio increased 23 per cent to Rs 133 billion in FY26. IDFC First Bank's gold loan book rose 79 per cent to Rs 39 billion in FY26 and reached Rs 49 billion by June, while AU Bank's portfolio more than doubled to Rs 39 billion and stood at Rs 45 billion in June. RBL Bank's book surged from Rs 4 billion in FY25 to Rs 43 billion in FY26, while Bandhan Bank's increased 57 per cent to Rs 30 billion.

Competition from Diversified NBFCs and Industry Outlook

The report also expects diversified NBFCs to intensify competition. Bajaj Finance's gold loan book grew at an 86 per cent CAGR over the past three years to Rs 210 billion as of June 2026, and the company has guided for Rs 300 billion by March 2027. IDFC First Bank and AU Bank are also rapidly expanding their portfolios. The report expects the overall gold loan industry to grow at a 28 per cent CAGR during FY26-FY28, with large private banks and diversified NBFCs gaining incremental market share.

(ANI)

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