Gold price rally, secured credit demand to lift NBFC gold-loan AUM: Crisil

Assets under management (AUM) of non-banking financial companies (NBFCs) focused on gold loans are projected to cross Rs 4 lakh crore by March 2027, driven by elevated gold prices, rising preference for secured credit and supportive regulatory changes, according to a recent analysis by Crisil Ratings.

Crisil estimates that the AUM of gold-loan NBFCs will grow at a compound annual growth rate (CAGR) of around 40% over the current and next fiscal years. This marks a sharp acceleration compared with the 27% CAGR recorded between fiscals 2023 and 2025, reflecting a favourable operating environment for gold-backed lending. Both demand-side and supply-side factors are aligning to support sustained expansion in the segment, the ratings agency said.

Sharp rally in gold prices

A key driver has been the sharp rally in gold prices, which surged nearly 68% in the first nine months of the current fiscal to hit record highs. Elevated prices have significantly increased the collateral value of pledged gold, enabling lenders to disburse higher loan amounts against the same quantity of jewellery. At the same time, borrowers facing tighter access to unsecured credit are increasingly turning to gold loans as a reliable and relatively quick source of funding.

NBFCs and gold loan

To capitalise on this trend, gold-loan NBFCs, across large and mid-sized players, have stepped up their expansion strategies, even as competition from banks has intensified. Aparna Kirubakaran, Director at Crisil Ratings, said large NBFCs are scaling up portfolios primarily through existing branches, while mid-sized players are adopting a twin approach of opening new branches and acting as originating partners for larger NBFCs and banks.

“These initiatives, coupled with strong demand amid elevated gold prices, have resulted in a roughly 40% increase in business per branch over the past two fiscals,” Kirubakaran said. Average AUM per branch stood at around Rs 14 crore in the first half of the current fiscal, compared with about Rs 10 crore in fiscal 2024, highlighting the sharp improvement in productivity.

Regulatory changes

Regulatory changes are expected to provide further impetus to growth. From April 1, 2026, streamlined loan-to-value (LTV) norms for lower-ticket gold loans will offer NBFCs additional headroom to lend.

According to Crisil, LTVs for lower-ticket bullet repayment loans could rise to about 70–75%, up from the current 65–68%, even after factoring in accrued interest under revised computation guidelines. This would allow borrowers to access more credit against the same gold collateral, enhancing the appeal of gold loans relative to other forms of borrowing.

Prashant Mane, Associate Director at Crisil Ratings, said a broader structural shift in the credit market is underpinning demand for gold loans. “Following asset quality challenges in unsecured lending and tighter underwriting standards, credit availability through unsecured routes has declined. Gold loans have emerged as a strong alternative, offering ease of access, faster turnaround times and flexible repayment options,” he said.

Growth and risks

However, Crisil cautioned that the pace of growth will need to be carefully managed. Higher disbursements at elevated LTVs reduce the cushion available to lenders in the event of gold price corrections. As a result, close monitoring of mark-to-market LTVs, disciplined auction processes and robust risk management frameworks will be critical. NBFCs will also need to maintain strict operational controls, including accurate purity assessment, secure custody practices and periodic branch-level audits.

Current gold loan market

The broader gold loan market is also witnessing strong momentum. Bank lending against gold rose 125% year-on-year as of the end of November, according to the latest Reserve Bank of India (RBI) data, driven by the sharp rise in gold prices that boosted collateral values and enabled borrowers to take larger loans. Gold loans have emerged as the fastest-growing loan segment over the past year, with growth nearly doubling in the last six months on an annual basis.

Outstanding bank gold loans increased from Rs 898 crore in November 2023 to Rs 1.59 lakh crore by November 2024, before more than doubling to Rs 3.5 lakh crore by November 2025. This expansion coincided with a near 64% rise in gold prices during 2025, taking the price of 24-carat gold to around Rs 1.35 lakh per 10 grams.

NBFCs have also expanded aggressively, with industry estimates pegging their outstanding gold loan book at about ₹3 lakh crore. However, banks have gained market share and now account for 50.35% of the gold loan market, overtaking NBFCs, according to the RBI’s Trends and Progress of Banking in India report. Finance companies account for the remaining share.

Muthoot Finance, Manappuram Finance and IIFL Finance remain among the largest players in the segment. According to the RBI’s Financial Stability Report, the combined gold loan exposure of banks and NBFCs accounted for 5.8% of total outstanding loans as of end-September, underscoring the growing significance of gold-backed lending within India’s credit landscape.