Gold loans overtake personal loans: Why Indian borrowers are shifting towards secured credit
Gold loans are emerging as a preferred source of credit for Indian borrowers, overtaking personal loans to become the second-largest retail asset class. The shift is being driven by sub-prime borrowers, MSMEs and semi-formal borrowers seeking quicker and more flexible financing.
- Sep 3, 2026,
- Updated Sep 3, 2026 7:45 AM IST
For Indian borrowers, gold is increasingly becoming more than a store of wealth. It is also emerging as a preferred source of credit, with households and small businesses turning to gold-backed loans as an alternative to unsecured borrowing.
The gold loan segment has nearly quadrupled over the past five years to ₹18.6 lakh crore as of March 2026, making it the second-largest asset class in the retail segment and surpassing personal loans, according to the “Morning India” report by Motilal Oswal Financial Services.
The segment grew 50% year-on-year in FY26, helped by a more than 60% rise in gold prices and increasing demand for gold-backed loans for personal consumption and business needs. The report expects the market to grow at a 28% CAGR during FY26-FY28, crossing ₹30 lakh crore by March 2028.
Why borrowers are turning to gold loans
One of the key reasons behind the shift is the advantage gold loans offer over unsecured credit for certain categories of borrowers. According to the Motilal Oswal report, for MSMEs and semi-formal borrowers, gold-backed loans can provide working capital with faster disbursal, flexible repayment options and limited documentation.
MUST READ: India’s hidden stimulus: How a ₹33-lakh-crore gold stockpile could boost consumption
Gold loans are also gaining acceptance among MFI borrowers and customers who use multiple retail credit products. Among MFI customers with other retail credit, gold loans account for the largest share at 18%.
The report noted that these borrowers can obtain higher ticket sizes at lower interest rates through gold loans, making secured borrowing an attractive alternative.
The shift is particularly visible among borrowers who have both gold loans and personal loans. Their outstanding personal-loan balances have moderated, especially in the sub-prime segment, indicating a gradual movement towards secured borrowing.
“Borrowers with both gold and personal loans have witnessed moderation in outstanding personal loan balances, particularly in the sub-prime segment, indicating a gradual shift toward secured borrowing,” the report said.
Gold ownership provides a massive lending opportunity
Despite the rapid expansion, the organised gold-loan market has only scratched the surface of India’s household gold wealth.
Indian households are estimated to hold around 28,000 tonnes of gold worth ₹380-390 trillion. Yet only around 8% of this stock is estimated to have been monetised through the organised gold-loan market, assuming an average loan-to-value ratio of around 60%.
The low penetration leaves considerable room for further growth, particularly as physical assets continue to account for a large share of household savings. Physical assets represented 64% of household savings in FY25, while savings in gold and silver ornaments rose 27% to ₹2.18 lakh crore.
ALSO READ: Gold loans may cross ₹30 lakh crore by FY28: Why more Indians are pledging gold
The market expands beyond traditional strongholds
Southern states continue to dominate gold lending, accounting for around 75% of the overall market. However, adoption is spreading rapidly to other parts of the country.
In FY26, gold loan books in Rajasthan, Maharashtra and Uttar Pradesh grew 78%, 61% and 58%, respectively, outpacing the overall industry growth of 50%.
The report attributed this shift to the gradual evolution of gold-pledging practices and greater cultural acceptance of gold loans across non-southern regions.
As banks, specialised gold-loan NBFCs and diversified lenders expand their presence, gold-backed credit is increasingly moving into the mainstream of India’s retail borrowing landscape.
For Indian borrowers, gold is increasingly becoming more than a store of wealth. It is also emerging as a preferred source of credit, with households and small businesses turning to gold-backed loans as an alternative to unsecured borrowing.
The gold loan segment has nearly quadrupled over the past five years to ₹18.6 lakh crore as of March 2026, making it the second-largest asset class in the retail segment and surpassing personal loans, according to the “Morning India” report by Motilal Oswal Financial Services.
The segment grew 50% year-on-year in FY26, helped by a more than 60% rise in gold prices and increasing demand for gold-backed loans for personal consumption and business needs. The report expects the market to grow at a 28% CAGR during FY26-FY28, crossing ₹30 lakh crore by March 2028.
Why borrowers are turning to gold loans
One of the key reasons behind the shift is the advantage gold loans offer over unsecured credit for certain categories of borrowers. According to the Motilal Oswal report, for MSMEs and semi-formal borrowers, gold-backed loans can provide working capital with faster disbursal, flexible repayment options and limited documentation.
MUST READ: India’s hidden stimulus: How a ₹33-lakh-crore gold stockpile could boost consumption
Gold loans are also gaining acceptance among MFI borrowers and customers who use multiple retail credit products. Among MFI customers with other retail credit, gold loans account for the largest share at 18%.
The report noted that these borrowers can obtain higher ticket sizes at lower interest rates through gold loans, making secured borrowing an attractive alternative.
The shift is particularly visible among borrowers who have both gold loans and personal loans. Their outstanding personal-loan balances have moderated, especially in the sub-prime segment, indicating a gradual movement towards secured borrowing.
“Borrowers with both gold and personal loans have witnessed moderation in outstanding personal loan balances, particularly in the sub-prime segment, indicating a gradual shift toward secured borrowing,” the report said.
Gold ownership provides a massive lending opportunity
Despite the rapid expansion, the organised gold-loan market has only scratched the surface of India’s household gold wealth.
Indian households are estimated to hold around 28,000 tonnes of gold worth ₹380-390 trillion. Yet only around 8% of this stock is estimated to have been monetised through the organised gold-loan market, assuming an average loan-to-value ratio of around 60%.
The low penetration leaves considerable room for further growth, particularly as physical assets continue to account for a large share of household savings. Physical assets represented 64% of household savings in FY25, while savings in gold and silver ornaments rose 27% to ₹2.18 lakh crore.
ALSO READ: Gold loans may cross ₹30 lakh crore by FY28: Why more Indians are pledging gold
The market expands beyond traditional strongholds
Southern states continue to dominate gold lending, accounting for around 75% of the overall market. However, adoption is spreading rapidly to other parts of the country.
In FY26, gold loan books in Rajasthan, Maharashtra and Uttar Pradesh grew 78%, 61% and 58%, respectively, outpacing the overall industry growth of 50%.
The report attributed this shift to the gradual evolution of gold-pledging practices and greater cultural acceptance of gold loans across non-southern regions.
As banks, specialised gold-loan NBFCs and diversified lenders expand their presence, gold-backed credit is increasingly moving into the mainstream of India’s retail borrowing landscape.