India’s gold lending industry is projected to witness approximately 28 per cent compound annual growth rate (CAGR) over FY26-28E, driven by the formalisation of credit and low monetization of household holdings, according to a report by Motilal Oswal. The segment has now overtaken personal loans to rank as the second-largest consumer lending category for banks and non-banking financial companies (NBFCs), standing behind home loans.
Data from the report revealed that Indian households possess an estimated 28,000 tonnes of gold valued between Rs 380 trillion and Rs 390 trillion. Despite this base, the formal sector accounts for only a small portion of the asset pool.
“A significant opportunity in India’s lending landscape stems from the underutilization of household gold holdings within the formal credit system,” the Motilal Oswal report stated.
According to the report, gold loans represent 15.7 per cent of consumption loans across banks and NBFCs. By FY26, the portfolio outstanding for gold loans stands at Rs 18.6 billion, surpassing personal loans at Rs 16.5 billion and auto loans at Rs 9.3 billion, while home loans continue to lead at Rs 44.4 billion.
Within the banking system, retail gold loans expanded at a CAGR of 78 per cent over the past three years. This pace outstrips other segments, including housing loans at 18 per cent, vehicle loans at 13 per cent, other personal loans at 13 per cent, and credit cards at 10 per cent, establishing gold-backed credit as the fastest-growing retail asset class.
“Despite Indian households holding an estimated ~28k tons of gold worth ~ Rs380-390t, only around 8% of this stock has been monetized through the organized gold loan market (assuming an average industry LTV of ~60%), highlighting the significant untapped opportunity for formal gold-backed lending,” the report noted.
The report mentioned that this limited formal penetration, when viewed against the scale and liquidity of the underlying asset, indicates that the segment remains largely unaddressed by institutional credit.
The structural transition from informal credit channels provides momentum to this growth trajectory. Organized lenders held 26 per cent of the total gold loan market in FY14, expanding their footprint to 37 per cent by FY24.
“The most consequential long-term shift in the gold loan market is the formalization of what was historically a moneylender-dominated, opaque credit category,” the report stated.
“With regulatory harmonization, digital KYC, and accelerating branch expansion by both banks and NBFCs, the pace of organized market share gain is likely to accelerate further from hereon,” it added.
