The value of loans against gold jewellery pledged with banks hit an all-time high for the 15th consecutive month, reaching Rs 2.94 lakh crore in August 2025, up from Rs 1.02 lakh crore in April 2024. Notably, since March this year, loans against jewellery have grown over 100% year-on-year every single month.
Price surge fuels demand
The rally in gold prices has been the primary driver behind the buoyancy in gold loan demand, said market participants. “I have not seen too much of the rise in tonnage. It seems more like the gold price has gone up by 40-45% over 12 months. That seems to be the key driver of the gold AUM,” said Karthik Srinivasan, Senior Vice President, Group Head – Financial Sector Ratings, Icra. On Tuesday, MCX spot gold hit a record Rs 1,09,013 per 10 grams. Over the past year, gold prices have jumped 53%.
“It’s driven by the prices and there’s not much of a base entry happening in terms of leverage,” Srinivasan added. He further noted, “As long as prices go up, the drive will be there. The only uncertainty is that if the prices fall, that could bring down growth rates.” For FY26, ICRA estimates growth of around 20% in gold loans from NBFCs, slightly lower than the 31% recorded in FY25.
Regulatory push and lender optimism
Regulatory efforts and shifting borrower preferences toward gold loans, due to their relatively higher Loan-to-Value (LTV) ratio compared to other collateral types, have also contributed to rising consumer interest.
Given current pressures in microfinance, personal loans, and other unsecured segments, gold loans appear to be an ideal growth area for lenders, said a senior private sector banker. “We are seeing healthy repayment behaviour in gold loans, which are largely used for household needs rather than speculative activity,” added Narendra Agrawal, President & Head of Branch Banking and Retail Liabilities at RBL Bank.
Chitrabhanu K G, EVP & Country Head – Agri, Micro & Rural Banking at Federal Bank, expects the gold loan book to grow between 1.2 to 1.5 times nominal GDP.
Lenders believe that the Reserve Bank of India’s guidelines on gold loans, effective from April 1, 2026, will create a common framework for lending to this segment across banks and non-bank financial companies.
Recently, to improve formal credit availability against gold—particularly for small borrowers requiring small-value loans—RBI allowed raising the maximum LTV ratio for consumption loans against gold collateral to 85% for loans up to Rs 2.5 lakh, 80% for loans between Rs 2.5 lakh and Rs 5 lakh, while the previous limit of 75% remains for loans above ₹5 lakh.