Indian families hold 28,000 tonnes of gold, valued at about $4.5 trillion, according to a UBS report. That’s more than India’s entire nominal GDP. According to government data, nominal GDP, or GDP at current prices, is estimated to reach a level of Rs 357.14 lakh crore ($3.5 trillion) in FY 2025-26.
With the gold price surging over 200% in the last 2-3 years, are Indians resorting to raising cash by selling gold? While there’s no official data on that yet, reports suggest that despite record-high gold prices, most Indian households are not selling. Instead, they are opting for gold loans.
Gold Loans: The New Growth Engine
The numbers tell the story clearly. According to data from Equifax India, gold loan disbursements grew 94% year-on-year, reaching Rs 8.16 trillion in OND’25, much more than the personal and home loans!
RBI data further underscores the scale of this shift. Banks and NBFCs together extended $20 billion and $23.4 billion in loans against gold and gold jewellery in FY25 and FY26, respectively — compared with an annual average of just $3 billion during FY22–FY24.
New RBI Rules Make It Easier to Borrow More
A significant change in RBI rules is now adding further momentum. According to June 2025 RBI guidelines, effective April 2026, the maximum Loan-to-Value ratio for gold loans below Rs 2.5 lakh has been raised to 85%, up from the long-standing cap of 75%. Loans between Rs 2.5 lakh and Rs 5 lakh can now go up to 80%, while loans above Rs 5 lakh continue under the 75% ceiling. Many companies have already started implementing these new rules.
This change allows small-ticket borrowers to access more credit against their gold, providing households with gold loans for urgent needs such as education, medical expenses, or working capital with increased liquidity and quicker access to funds.
Why Indians Borrow Against Gold Instead of Selling It
The surge in gold loans is not simply a financial trend — it is rooted in culture. Selling gold for meeting financial needs has always been considered the last resort for most Indians.
Narinder Wadhwa, MD and CEO of SKI Capital Services, says, “Indians don’t sell gold in tough times — they borrow against it, preserving both wealth and tradition.”
For generations, gold has symbolised not just wealth but dignity, family honour, and social standing. It is accumulated over a lifetime — through marriages, festivals, and inheritance — and is rarely viewed as something to be liquidated. In many households, selling gold is considered inauspicious or a sign of financial distress, often avoided unless absolutely unavoidable.”
“Gold loans offer a practical bridge between emotional attachment and financial necessity. They allow households to unlock liquidity without parting with an asset that carries deep sentimental value,” adds Wadhwa.
Dr. Anshuman Jaswal, Director of NMIMS Indore, explains the dynamic: “There are two main benefits of using gold loans instead of outright sale. The first is that the gold can return to its owner once the loan has been paid off. The second is that the stigma associated with selling gold — a sign of economic distress — can be avoided.”
“Better interest rates compared to unsecured loans and credit cards make gold loans more viable. Rising gold prices further reinforce retention over sale, says Dr. Jaswal.
Gold Wealth Is Real — But It Is Not Being Spent
The MCX Spot gold price in September 2024 was Rs 73,000, which has now reached around Rs 1,45,000 for 10 grams 24 carat. Still, Indians are less likely to convert gold into cash.
Tanvee Gupta Jain, Chief India Economist at UBS Securities, explains why: “The gold-related wealth effect seems less effective to support broader household consumption, primarily because Indian households generally prefer not to sell gold — mostly held as jewellery — even when prices are high, due to cultural significance, as a haven, or as a financial safety net.”
Who Is Using Gold Loans and For What
According to a UBS report, most gold loans are likely being used for business-oriented needs — working capital requirements and funding gaps of traders, small businesses, and agriculture — as well as rural consumption, including weddings, education, and healthcare.
This effect is particularly important for low-income households, which draw on gold as both a savings asset and collateral, helping smooth spending and financial needs when incomes fluctuate.
Dr. Narayani Ramachandran, Director of NMIMS Bangalore, sums it up: “Gold loans provide immediate cash for emergencies without losing the sentimental, familial, or long-term investment value. Selling gold also attracts capital gains tax, while gold loans do not. Pledging gold allows households to manage liquidity while maintaining their wealth and their sentiments intact.”