India’s biggest lending boom is no longer happening in personal loans or credit cards. It is happening against an asset Indians have owned for generations: gold.
Gold loans have become one of the fastest-growing retail lending segments as tighter regulations on unsecured credit, record gold prices and the formalisation of the market reshape borrowing behaviour.
The combined gold loan portfolio (bank + NBFC) has grown by 50% YoY to roughly ₹18.6 lakh crore as of March 2026. RBI’s data points to sharper growth in banks’ retail gold lending, which has increased 105% YoY to ₹5.1 lakh crore as of May 2026.
Many would simply attribute the growth to higher gold prices, but that’s only part of the story. The bigger story is the convergence of three structural forces: tighter regulation of unsecured lending, stronger credit demand from MSMEs seeking quick working capital, and the ongoing migration of borrowers from the informal gold loan market to regulated banks and NBFCs.
Formalisation is Driving the Opportunity
The biggest long-term opportunity lies in formalisation of the market. Traditionally, gold lending in India has been dominated by local moneylenders and pawnbrokers, especially across rural and semi-urban India. Banks have always been present, but specialist lenders have built an edge through faster disbursals, deeper branch networks and expertise in valuing pledged jewellery. That formalisation trend is now accelerating.
Another important development came from the RBI. Effective April 1, 2026, all lenders now follow common rules on loan-to-value ratios, gold valuation standards, customer disclosures and auction procedures.
That creates a more level playing field while improving customer confidence in organised gold lending. Therefore, the story has now shifted from banks taking share from NBFCs, or vice-a-versa, to organised players collectively taking share from the informal market.
Which lenders stand to benefit the most?
Not every lender will benefit equally from India’s gold loan boom. For specialist gold financiers, the opportunity lies in expanding branch networks, attracting customers from the informal market and maintaining healthy spreads without compromising asset quality. For banks, the advantage comes from combining gold lending with low-cost deposits, allowing them to grow the business while keeping funding costs in check.
Among listed players, four names stand out. Muthoot Finance, Manappuram Finance and IIFL Finance, each at a different stage of its growth cycle. CSB Bank, meanwhile, offers a differentiated play through its unusually high exposure to gold loans and strong deposit franchise.
Together, these companies provide investors with four distinct ways to participate in one of India’s fastest-growing secured lending segments.
#1. Muthoot Finance: The Category Leader with the Deepest Moat
Muthoot Finance is India’s largest gold loan NBFC with over nine decades of specialised experience in gold-backed lending. Its consolidated gold loan AUM rose 54% YoY to ₹1.65 lakh crore in FY26, driven by both higher loan disbursements and rising gold prices.
It operates through a network of more than 7,500 branches, with an average gold loan AUM per branch of ₹31 crore at the end of March 2026, growing by 46% YoY. This indicates the growth was driven not only by network expansion but also by better utilisation of existing branches.
That operational efficiency helps explain why Muthoot consistently earns among the highest returns in the sector.
Muthoot Finance: Financial Performance
| Metrics | FY25 | FY26 | Change |
| AUM Growth (₹ crore) | 1,22,181 | 1,81,916 | 48.8% |
| Net Interest Income- NII (₹ crore) | 19663 | 30371 | 54.5% |
| Net Interest Margin- NIM (in %) | 11.45 | 12.75 | +130 bps |
| Net Profit (₹ crores) | 5,352 | 10,607 | 98.2% |
| Return on Equity- ROE (in %) | 19.7 | 30.6 | +1090 bps |
The numbers highlight the quality of the business. In FY26, consolidated Net Interest Income (NII) rose 54.5% YoY to ₹30,371 crore with Net Interest Margin (NIM) expanding by 130 bps to 12.75%. The consolidated profit nearly doubled to ₹10,607 crore during the financial year.
Muthoot Finance: Widening Interest Spreads
The key driver behind growth in profitability was widening interest spreads, meaning the difference between the average yield earned on loans and the average cost of funds paid on borrowings. In FY26, the interest spreads widened from 9.59% in FY25 to 11.38% in FY26.
FY26 was a strong year for the company, but management has set 15% gold loan AUM growth in FY27, suggesting the company is prioritising profitability over chasing unsustainable growth.
#2. Manappuram Finance: Betting on the Turnaround
If Muthoot represents consistency, Manappuram represents recovery. Over the past few years, Manappuram’s non-gold lending business was proving to be the big drag, weakening its core gold lending franchise.
FY26 marked the beginning of a potential turnaround. Bain Capital’s strategic investment, providing both capital and a strong external validation, resulted in a strong re-rating of the stock.
Manappuram Finance: 1-year Stock Price Chart
In the last 12 months, Manappuram stock price rallied nearly 40%, reaching an all-time high level of ₹362.
Manappuram Finance: Financial Performance
| Metrics | FY25 | FY26 | Change |
| AUM Growth (₹ crore) | 43,034 | 63,798 | 48.3% |
| Net Interest Income- NII (₹ crore) | 6,470 | 5,724 | -11.5% |
| Net Profit (₹ crores) | 1,204 | 993 | -17.5% |
| Return on Equity- ROE (in %) | 10.0 | 7.7 | -230 bps |
| Net Non-Performing Asset- NNPA (in %) | 2.4 | 1.6 | +80 bps |
At first glance, FY26 numbers appear disappointing. Manappuram’s Net Interest Income (NII) and consolidated profit fell 11.5% and 17.5% YoY, respectively, despite strong growth in gold loan AUM. Looking closely, the weakness was primarily driven by the non-gold lending business. Higher credit costs and weaker profitability in the non-gold portfolio offset the strong momentum within the core gold loan business.
This also resulted in compression in interest spreads. Falling from 13.21% in FY25 to 9.96% in FY26.
Manapuram Finance: Falling Interest Spreads
However, Manapuram’s gold lending business is showcasing a strong turnaround. Gold loan AUM per branch nearly doubled to ₹13.9 crore in FY26 from around ₹7 crore a year earlier, indicating a significant improvement in branch productivity. As per the management, the turnaround is being supported by lower operational expenditure, greater digital origination, and expanding co-lending.
Manappuram is no longer simply a gold loan company benefiting from favourable industry conditions. It is increasingly becoming a turnaround story.
#3. IIFL Finance: A Regulatory Reset Has Turned Into a Growth Story
IIFL Finance has staged one of the strongest recoveries in the sector after the RBI lifted restrictions on fresh gold loan disbursals in September 2024. Since then, the company has repositioned itself around secured lending, with gold loans emerging as its primary growth engine.
IIFL Finance: Gold Loan AUM
Gold loan AUM surged to ₹58,406 Cr, up 114% YoY in Q1FY27, emerging as the primary growth driver for the company.
IIFL Finance: Financial Performance
| Metrics | FY25 | FY26 | Change |
| AUM Growth (₹ crore) | 78,341 | 1,08,180 | 38.0% |
| Net Interest Income- NII (₹ crore) | 3996 | 4304 | 8.0% |
| Net Profit (₹ crores) | 578 | 1,817 | 214.0% |
| Return on Equity- ROE (in %) | 7.0 | 17.9 | +1089 bps |
| Net Non-Performing Asset- NNPA (in %) | 1.0 | 0.68 | +32 bps |
In FY26, IIFL Finance reported 8% growth in net interest income to ₹4,304 crore. More importantly, net profit jumped 214% to ₹1,817 crore as lower credit costs, improving operating leverage and the revival of gold lending restored profitability.
IIFL Finance: Interest Rate Spread
The company’s interest spread also improved to 16.3% during FY26 and expanded further in Q1 FY27, suggesting that earnings quality, not just loan growth, is improving.
Unlike a typical turnaround story driven by cost-cutting, IIFL’s recovery is being supported by a strategic shift in its business mix. Nearly 90% of the loan book is now secured, reducing earnings volatility while improving capital efficiency. At the same time, management is expanding co-lending partnerships and deploying AI-led underwriting and collections to improve productivity.
#4. CSB Bank: A Bank Building on its Gold Loan Franchise
Unlike the three NBFCs discussed above, CSB Bank offers exposure to the gold loan theme through a very different business model.
CSB Bank combines a strong gold lending franchise with the funding advantage of a deposit-led banking model. Gold loans accounted for 54% of total advances in Q1 FY27, making CSB one of the most gold-focused banks in the country. The portfolio grew 47% year-on-year to ₹21,906 crore.
What sets CSB apart is its low-cost funding advantage. Unlike NBFCs, which rely largely on market borrowings, CSB funds its loan book through customer deposits. It helps to keep its cost of funds lower.
CSB Bank: Financial Performance
| Metrics | FY25 | FY26 | Change |
| AUM Growth (₹ crore) | 31,842 | 40,359 | 26.8% |
| Net Interest Income- NII (₹ crore) | 1,476 | 1,720 | 16.5 |
| Net Profit (₹ crores) | 594 | 633 | 7.0% |
| Return on Equity- ROE (in %) | 15.4 | 14.1 | -130 bps |
| Net Non-Performing Asset- NNPA (in %) | 0.52 | 0.40 | +12 bps |
FY26 reflected the stability of this model. Net interest income increased 16.5% to ₹1,720 crore, while net profit rose 7% to ₹633 crore. Asset quality remained among the strongest in the sector, with net non-performing assets declining to just 0.4%.
CSB Bank: Loan Book Mix
Another notable trend is the increasing contribution of gold loans to the overall balance sheet. Gold loans accounted for 53% of gross advances in FY26, up from 44% a year earlier. Management expects the portfolio to continue growing at 30-35% during FY27, even as it gradually diversifies into other retail and SME lending segments.
CSB Bank is not a pure-play gold lender. Instead, it offers investors exposure to the structural growth in gold lending within the framework of a traditional banking franchise.
How the Market Is Valuing the Gold Story
At first glance, comparing price-to-book multiples may suggest that some stocks are expensive while others appear to trade at a discount.
Valuations: Price-to-book Trend
| Company | Price-to-book | 5 yr Median Price-to-Book |
| Muthoot Finance | 3.1 | 3.1 |
| Manappuram Finance | 2.1 | 1.4 |
| IIFL Finance | 1.8 | 2.1 |
| CSB Bank | 1.2 | 1.6 |
Muthoot Finance is trading at 3.1x book value, in line with its five-year median, suggesting investors continue to assign a premium to its dominant market position, consistent execution and market leadership.
Manappuram Finance, at 2.1x book value, trades well above its historical average of 1.4x, indicating that the market is pricing in a recovery in its gold loan business supported by Bain Capital’s strategic investment.
In contrast, IIFL Finance still trades below its historical valuation despite sharp operational recovery. The market seems to be waiting for a longer track record of consistent execution before assigning higher multiples.
CSB Bank also trades below its historical multiple, but for different reasons. Its valuation reflects the broader dynamics of the banking sector rather than its gold loan franchise alone. Investors are effectively valuing a diversified bank that happens to have one of India’s strongest gold loan businesses.
The market is no longer rewarding companies simply because they operate in a fast-growing industry. Instead, valuations increasingly reflect the quality and durability of earnings, funding advantages, governance standards and the sustainability of return on equity.
From Rapid Expansion to Sustainable Growth
India’s gold loan industry is moving into a new phase. The explosive growth witnessed in FY26 was supported by an unusual combination of record gold prices, tighter regulation of unsecured lending and accelerating formalisation of the gold loan market.
While that pace of expansion is unlikely to be repeated, the broader structural opportunity remains intact. As growth normalises, investors need to look beyond AUM growth and focus on the quality of individual gold loan companies. Funding costs, branch productivity, underwriting discipline and capital allocation will increasingly determine which lenders continue to compound shareholder value.
The next phase will be driven by execution, and that is where long-term winners are likely to separate themselves from the rest. Until then, add these stocks to your watchlist and track how well they execute their growth strategies.
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Deepan Datta has spent over a decade studying stocks and mutual funds. His passion is to uncover interesting stories in the financial markets and share them through his writings with investors at large. He is focused on delivering clear, easy to understand and research-backed insights. Deepan began his career as a Research Associate at S&P Global, where he developed a strong foundation in financial research and data analysis.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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