For years, Muthoot Finance and Manappuram have been the familiar faces of India’s gold loan market. That familiar landscape is now changing as a slew of large, corporate-backed NBFCs enter the ₹18.6-lakh-crore gold loan segment, intensifying the fight for borrowers, branches and pricing power.
In recent months, Tata Capital, Aditya Birla Capital, Shriram Finance, L&T Finance and Godrej Finance have either forayed or announced expansionin India’s fast-growing gold loan market. Aditya Birla Capital, for instance, targets 1,000 gold loan branches in three years, while Tata Capital acquired Yogakshemam Loans, marking the Tata Group’s entry into gold loans. Godrej Capital has also taken the inorganic route, acquiring Kanakadurga Finance’s gold loan portfolio.
The rush comes as the gold loan segment has surged nearly four-fold in the past five years to ₹18.6 lakh crore as of March 2026, becoming the second-largest asset class in the retail segment and surpassing personal loans. According to Motilal Oswal Financial Services, the segment is set to grow at a 28% CAGR over FY26-FY28, crossing ₹30 lakh crore by March 2028.
Yield Pressures
“As lenders seek to establish scale, competitive pricing and targeted expansion are likely to exert pressure on yields, particularly in higher-ticket and relatively rate-sensitive borrower segments,” said Aniket Dani, Director, Crisil Intelligence.
R Srinivasan, Vice President & Sector Head, Financial Sector Ratings, ICRA, said new entrants can offer attractive lending rates to borrowers, which would result in a moderation in effective yields. “The increasing share of higher-ticket loans, driven by rising gold prices, is also placing gold loan NBFCs in competition with banks targeting a similar borrower segment, thereby adding to competitive pressures.”
Gold loan yield of Muthoot Finance, the country’s largest gold loan NBFC, fell by 300 bps sequentially to 17.93% in the first quarter of the current financial year. Executive Vice Chairman-designate George Alexander Muthoot, however, attributed the decline to a variety of reasons. “We have reduced interest rates on some products. We have both higher-rate and lower-rate products, and this quarter, the lower-rate loans probably accounted for a larger share,” Muthoot told FE recently.
Srinivasan said changes in product offerings, such as a shift from bullet loans to regular servicing loans, and lower loan-to-value (LTV) ratios at disbursement compared with the past for higher-ticket bullet loans can result in yield moderation or churn in the borrower base for existing lenders.
Branch Wars
The competitive push is also translating into an aggressive branch expansion race. L&T Finance recently announced plans to add 500 dedicated gold loan branches annually over the next four to five years, while Shriram Finance is looking to more than double its gold loan book to ₹20,000 crore, enabling 500 more branches to do gold loans from 2,000 branches currently.
To be sure, banks continue to hold 75% of the market, while NBFCs account for only 12%, leaving significant headroom for both existing lenders and new entrants.
Muthoot believes the operational challenges in operating a gold loan business may also keep the competition in check. He said the new entrants may have deep pockets and lesser cost of funds but are not focused gold loan players. “Focused gold loan players and also gold loan players have a difference, which people will realize after some time only. Because this is a very operationally challenging, operationally intensive business.”
Gold lending remains an inherently branch-led business requiring specialised expertise in gold appraisal, collateral management, and customer servicing, supported by extensive distribution networks and long-standing customer relationships. Dani sees these factors as a significant structural advantage for incumbent NBFCs. “While new entrants can leverage strong balance sheets, established customer ecosystems and ability to cross-sell gold loans through their existing networks, replicating branch infrastructure, operational capabilities and customer trust at scale requires considerable time and investment,” Dani said.