Gold loans surge 128% to Rs 3.38 lakh crore as borrowers shift to secured credit, RBI data shows

Gold loans have emerged as one of India’s fastest-growing retail credit segments, with outstanding loans against gold jewellery surging 128.5% year-on-year to Rs 3.38 lakh crore in October 2025, according to the Reserve Bank of India’s State of the Economy report for December 2025. This triple-digit expansion since February 2025 has far outpaced overall bank credit growth, nearly doubling gold loans’ share in total non-food credit and underscoring a sharp shift in borrowing behaviour.

Growth drivers

Several factors have fuelled this rapid rise. Elevated gold prices, hovering near record highs through much of 2025, have significantly enhanced collateral value, enabling borrowers to raise larger loan amounts against the same quantity of gold. At the same time, tighter regulatory scrutiny on unsecured lending, combined with macroeconomic uncertainties such as persistent inflation and higher interest rates, has pushed households towards secured credit options.

Gold loans also offer clear cost and convenience advantages. Interest rates typically range between 9% and 15%, compared with 20% or higher for personal loans. Processing is fast, documentation requirements are minimal, and disbursal often happens within a few hours. These features have made gold loans particularly attractive in Tier-II and Tier-III cities, where household gold ownership is high and access to formal credit has steadily improved with deeper financial inclusion.

RBI data highlights

RBI data showed that banks’ gold loan portfolios grew by over 120% year-on-year between February and August 2025, with Non-Banking Financial Companies (NBFCs) reporting similar trends. By October, gold loans accounted for nearly a quarter of incremental personal loan additions, helping push total retail credit outstanding to ₹64.56 lakh crore.

In contrast, broader retail credit growth remained relatively modest, highlighting a preference among borrowers for collateral-backed liquidity. Salaried individuals, farmers, small traders, and micro-entrepreneurs increasingly turned to gold loans to meet short-term funding needs amid tighter unsecured credit conditions.

Risks and outlook

While the RBI has cautioned banks about monitoring fast-growing pockets of retail credit, gold loans are viewed as relatively safer due to their tangible collateral. The central bank has nevertheless emphasised the need for prudent valuation, transparent processes, and adherence to regulatory safeguards. Analysts expect growth to moderate if gold prices stabilise or unsecured lending conditions ease, but the segment is likely to remain resilient amid ongoing formalisation of household finance. Overall, the surge reflects adaptive consumer behaviour in a volatile economic environment.

Gold loan and what has changed in RBI rules for 2025?

A gold loan is a secured loan in which a borrower pledges gold jewellery or gold coins as collateral to raise funds. It is commonly used by individuals who need quick access to cash but may lack a strong credit history or immediate access to traditional bank credit. Gold loans are offered by banks, NBFCs, and private financiers and are popular for their speed, simplicity, and ease of access.

However, gold loans carry risks. Failure to repay on time can result in the auction of pledged gold, making it crucial for borrowers to understand loan terms and regulatory protections.

Under the RBI’s gold loan rules for 2025, several changes aim to enhance transparency and reduce systemic risk. The Loan-to-Value (LTV) ratio for gold loans above Rs 5 lakh has been capped at 75%, limiting excessive leverage. Smaller loans of up to Rs 2.5 lakh can still carry a higher LTV of up to 85%, offering relief to small borrowers.

Borrowers must now provide proof of ownership for pledged gold, such as purchase receipts or a declaration. Lenders are also required to issue a Gold Purity Certificate detailing purity, weight, deductions, and final valuation. Eligible collateral includes gold jewellery and select bank-minted gold coins, while bullion and gold-backed financial products remain excluded. Notably, RBI has also permitted loans against silver jewellery and coins for the first time, widening access to secured credit.