The boom in gold loans shows no signs of abating – it was Rs 3.58 lakh crore as on 28 November 2025 as against Rs 1.59 lakh crore a year, according to data recently released by the RBI.
Gold loans are increasingly a way to meet business requirements or financial emergencies of the family, at a time when finding jobs / employment is difficult in urban areas. In rural areas too, farmers are increasingly relying on gold loans as a collateral for agriculture-related loans.
Gold prices in Mumbai are currently at Rs 1.6 lakh levels for 10 gm and have gained nearly 80% over the past one year.
Investors are increasingly looking to leverage the rapid rise in gold prices and the related borrowing surge by consumers via investment in gold loan NBFCs.
Investor bullishness for leading gold loan NBFCs has led them to trade close to their 52-week highs – Muthoot Finance gained 0.7% to Rs 3,962 in early Thursday trade, and not too far from its 52-week high of Rs 4,149 that was reached on 29 January, 2026.
Manappuram Finance rose 0.8% in early Thursday trade to Rs 304.9, and it had reached its 52-week high of Rs 321 on 7 January, 2026.
The Battle for Dominance
December 2025 quarter – operational performance
| Standalone loan growth (%) | NIM (%) | Standalone net profit growth (%) | Net NPA (%) | |
| Muthoot Finance (gold loan business) | 51% | 12.8% | 94.9% | 1.3% |
| Manappuram Finance (gold loan business) | 56.8% | 18.5% | -15.9% | 2.2% |
| HDFC Bank | 12% | 3.5% | 11.5% | 0.42% |
Muthoot Finance, the country’s largest gold loan financier, earned 20.3% on average loan assets in Q3FY26 as against 18.6% a year earlier. And its net interest margin (NIM) was 12.8% in the December 2025 quarter as against 11.6% a year earlier.
Resilience in Margins
The above growth in NIM is commendable as banks have faced a temporary pressure on NIMs in the December 2025 quarter with the RBI taking several steps over the past few months to lower interest rates on loans / credit and boost lending in the broader banking system.
Earlier, HDFC Bank, the largest private sector bank, reported NIM of 3.5% based on interest earnings assets in the December 2025 quarter as compared to 3.6% a year earlier.
The growing importance of gold loan financing to meet business or personal fund requirements is once again highlighted by the very strong growth in Muthoot Finance’s gold loan AUM.
It’s standalone gold loan assets under management (AUM) increased a staggering 51% y-o-y to Rs 1.47 lakh crore in Q3FY26, its highest ever.
The core gold loan business is reflected in the standalone results of the NBFC.
Meanwhile, smaller rival, Manappuram Finance’s standalone gold loans were Rs 37,144 crore in the December 2025 quarter, a surge of 56.8% y-o-y.
The NBFC has highlighted its net yield, broadly similar to net interest margin (NIM) for a bank, was 18.5% in Q3FY26 as against 22.2% a year earlier.
The growing importance of gold as a collateral for loans is highlighted with Manappuram Finance pointing out the average ticket size of online gold loan at Rs 1.1 lakh in the December 2025 quarter vis-a-vis Rs 73, 000 a year earlier.
Online gold loans accounted for 92% of loans in this segment, Manappurram Finance highlighted.
Profitability vs. Asset Quality
Muthoot Finance’s net stage lll loan assets to gross loan assets was 1.3% in the December 2025 quarter as against 3.5% a year earlier. The ratio of stage III loan assets to gross assets is a financial metric that shows the proportion of a financial institution’s loans that are considered non-performing or past due, typically by more than 90 days.
A strong demand for gold loans and NIM helped Muthoot Finance’s standalone net profit jump nearly 94.9% y-o-y to Rs 2,656 crore in the December 2025 quarter.
Meanwhile, Manappuram Finance has highlighted its standalone net NPA was 2.2% in the December 2025 quarter and broadly similar to 2.3% a year earlier.
Also, for Manappuram Finance, its impairment on financial instruments was Rs 128 crore in Q3FY26 as against Rs 77.3 crore a year earlier.
A similar trend was also witnessed in the September 2025 quarter with this NBFC faced a 126% y-o-y rise in impairment on financial instruments to Rs 120 crore.
Higher operating costs and pressure on net yield resulted in Manappuram Finance’s standalone net profit declining 15.9% y-o-y to Rs 381.2 crore in the December 2025 quarter.
The core gold loan business is reflected in the standalone results of the NBFCs.
Change in psychology
The yellow metal has been a traditional savings avenue for Indian households with nearly 25,000 to 27,000 tonnes held in the country and valued at between $ 4-6 trillion, as per various estimates. And with employment opportunities getting harder and / or incomes not keeping up with inflation in prices of goods and services (especially in urban area), households are increasingly mortgaging their gold with NBFCs and banks to raise funds for business, marriages or meeting family emergencies.
This in turn has created new business opportunities for banks and NBFCs with new loan customers being increasingly acquired digitally along with online loan repayment options.
Efficiency kings – Return on Equity (ROE)
Muthoot Finance had a ROE of 19.7% on a standalone basis in the current financial year, according to Screener.in, and it was 16% for Manappuram Finance.
HDFC Bank’s ROE was 14.3% on a standalone basis, according to Screener.in.
Valuations and outlook
Valuations comparison
Gold prices have corrected nearly 10% from their peak levels in Mumbai.
However, demand for gold loans is expected to remain strong, going forward. The RBI has also taken several steps to boost lending in the broader banking system, and lower the cost of funding for financial institutions.
M&A Catalysts and Funding
The US-based Bain Capital is also awaiting all RBI regulatory approvals before it can acquire an 18% stake in Manappuram Finance, and also trigger a mandatory open offer for an additional 26% stake in the NBFC.
Meanwhile, Muthoot Finance had recently raised $ 600 million (nearly Rs 5,400 crore) via Global Medium Term Note Programme and it will help the company to meet the expected surge in gold loans over the next few quarters.
Comparing Valuations
| Price to (standalone) book value | Standalone Return on Equity (%) | |
| Muthoot Finance | 5.1 times | 19.7% |
| Manappuram Finance | 2.1 times | 16% |
| HDFC Bank | 2.6 times | 14.3% |
Muthoot Finance trades on the preferred valuation matrix – price to (standalone) book value of 5.1 times, according to Screener.in, while it is 2.1 times for Manappuram Finance.
HDFC Bank trades on the above valuation matrix at 2.6 times, according to Screener.in.
Gold loan NBFCs have rich valuations, given investor expectations of strong long-term growth prospects. Investors could put these stocks on their watch list for 2026.
Disclaimer:
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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