Only 15% of India’s gold is monetised: Why gold loans could become a new consumption engine

Indian households hold an estimated 25,000 tonnes of gold worth US$3.9 trillion, but only around 15% of these holdings are currently monetised, according to Jefferies. The brokerage sees significant headroom for gold-backed lending, which could unlock household wealth and provide a further boost to consumption.

Gold, traditionally a dormant household asset, is increasingly being used as collateral as prices remain elevated. Jefferies estimates gold loans at US$197 billion as of March 2026, up around 73% in US dollar terms over the past two years.

Gold loans now account for about 7% of total bank and NBFC credit, while gold monetisation through banks and NBFCs has increased from less than 4% before 2020 to around 5.1% in March 2026.

“Traditionally a dormant asset, gold is increasingly being monetised through gold-backed loans amid the current price upcycle,” Jefferies said in its report, India’s Hidden Stimulus: The Gold Wealth Effect.

The brokerage estimates that, assuming a 65% loan-to-value ratio and taking additional lending through unorganised channels into account, only around 15% of household gold holdings are currently monetised.

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Significant room for further lending

The gap between gold prices and the pace of gold-loan growth leaves room for further monetisation, Jefferies said. Gold loans as a percentage of gold holdings are down around 80 basis points from March 2024 levels, as lending has not kept pace with the rapid increase in gold prices.

“A reversion over next two years can drive ~8-10ppt/US$15-20bn per annum rise in Gold loans,” the brokerage said.

That additional borrowing could become an important transmission mechanism between rising gold prices and household spending. The effect is potentially broader than the wealth impact seen in financial assets because gold ownership is widespread across rural and lower-income households.

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Potential consumption boost

Jefferies estimates that the increase in gold-loan assets during FY26 itself corresponded to around 130 basis points of GDP. It said the gold wealth effect could help support consumption, particularly amid weaker monsoon conditions.

“Unlike equities, Gold ownership is widespread across rural and lower-income households,” Jefferies said. “As a result, the Gold wealth effect could offer a buffer amid deficient monsoons and provide tailwind to bottom-of-the-pyramid consumption.”

The potential impact could increase further if gold prices continue to rise. Jefferies estimates that a 10% increase in gold prices would create around US$400 billion in household wealth and generate another US$20-25 billion in gold loans.

“Together this will be another ~80-100bps GDP / spending tailwind,” it said.

However, the report also flags a trade-off: higher gold prices can increase India’s import bill. Gold imports, including jewellery, rose from US$36 billion in FY23 to US$79 billion in FY26, equivalent to around 2% of GDP, creating pressure on the current account.

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