The surge in gold loans by NBFCs and banks shows no signs of easing – it was Rs 3.16 lakh crore on 19 September 2025 vis-à-vis Rs 1.47 lakh crore a year earlier, according to data released by the RBI. And as per various estimates, NBFCs account for nearly 55-60% of all gold loans disbursed in the broader financial system.
This in turn has resulted in continued investor bullishness for gold loan NBFCs – Muthoot Finance declared its results on Thursday after the close of trading hours, and the stock gained 9.9% to Rs 3,726.9 on Friday, and it had touched a 52-week of Rs 3,752.9 high earlier in the trading session.
And Manappuram Finance gained 2.8% to Rs 281.4 on Friday, and not too far from its 52-week high of Rs 298 that was reached on 17 September 2025.
Muthoot Finance v/s Manappuram Finance in Q2FY26
Muthoot Finance, the country’s largest gold loan financier, earned 19.99 % on average loan assets in QFY26 vis-à-vis 18.65% a year earlier. And its interest spread, broadly the Net interest margin (NIM), was 11.2 % in the September 2025 quarter vis-à-vis 9.6% a year earlier.
And Manapuram Finance has highlighted in its results presentation that its net yield was 19.7% in the September 2025 quarter vis-à-vis 22% a year earlier.
Earlier, HDFC Bank, the largest private sector bank, had highlighted its NIM on interest earning assets was 3.4% on total assets in the September 2025 quarter vis-à-vis 3.7% a year earlier. The central bank had cut repo rates in its meeting in early June 2025, and while interest rates on bank loans / credit facilities have come down, interest rates on deposits with the bank come down with a lag. This has created a temporary pressure on NIMs for banks.
Meanwhile, Muthoot Finance’s gold loan assets under management (AUM) increased 45% y-o-y to Rs 1.24 lakh crore in QFY26, its highest ever.
In the case of Manapuram Finance, its standalone gold loan AUM of Rs 30,236 crore was up by 30.1 % on a y-o-y basis.
For HDFC Bank, its advances at the end of the September 2025 quarter were Rs 27.46 lakh crore, a growth of 10%. HDFC Bank’s advances to deposit ratio has been hovering well over 90% in the merged entity and it has been cautious in growing its loan book for several quarters.
NPAs and net profit growth
Muthoot Finance’s net stage lll loan assets to gross loan assets was 1.86% in the September 2025 quarter vis-a-vis 3.68% 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 strong NIMs helped Muthoot Finance’s standalone net profit jump nearly 87.5% y-o-y to Rs 2,345 crore in the September 2025 quarter.
In contrast, Manapuram Finance has highlighted its standalone net NPA was 2.6% in the September 2025 quarter vis-à-vis 2.1% a year earlier.
Also, for Manapuram Finance, its impairment on financial instruments was Rs 120 crore in Q2FY26 vis-à-vis Rs 53.2 crore a year earlier. In addition, it faced higher operational costs and as a result, standalone net profit fell nearly 20 % y-o-y to Rs 375.9 crore in the September 2025 quarter.
Meanwhile, HDFC bank’s % of net NPAs to net advances was 0.42% in the September 2025 quarter vis-à-vis 0.41% a year earlier.
Higher provisioning also resulted in HDFC Bank’s standalone net profit rising only 10.8% y-o-y to Rs 18,641.3 crore in the second quarter of FY 26.
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 a few trillion dollars, 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 Manapuram Finance.
HDFC Bank’s ROE was 14.3% on a standalone basis, according to Screener.in.
Valuations and outlook
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.
Muthoot Finance trades at a P/E of 20.6 times on a standalone basis, according to Screener.in,
while it is 14.6 times for Manapuram Finance.
HDFC Bank trades at a P/E of 21.4 times on a standalone basis, 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.
Disclaimer:
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.
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
Disclosure: The writer and his family do not hold the stocks discussed in this article.
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