Gold Loan Sector Grows 42% As High Gold Prices and Rising Demand Fuel Expansion

India’s gold loan sector continues to witness strong momentum, driven by elevated gold prices and steady growth in customer borrowing. According to data from Muthoot FinCorp and a Jefferies India report, the total gold loan market expanded 42% year‑on‑year to ₹15.6 trillion as of November 2025.

Retail loans against gold jewellery rose 93% during the period, while bank‑issued gold loans registered an even faster growth of 127% compared with the previous year. The sector’s expansion reflects both cyclical tailwinds and deeper structural changes in borrowing behaviour.

Surge In Demand Across Retail and Bank Channels

The strong uptake in gold‑backed lending comes amid a broad rise in borrower interest from households, traders and small enterprises. Retail gold loans, traditionally used for emergency liquidity, have now seen wider mainstream acceptance.

Bank‑originated gold loans have grown sharply, outpacing retail channels and underscoring the shift toward formal credit institutions. These growth patterns indicate increased comfort with regulated lenders and greater confidence in gold‑secured borrowing.

Intensifying Competition and Branch Expansion in FY26

The Jefferies report notes that competition in the gold loan industry has intensified as new entrants and mid‑sized NBFCs expand aggressively. Over 900 new branches have already been added in FY26, indicating rising participation in a high‑growth lending segment.

Large NBFCs such as Muthoot and Manappuram may further accelerate their network expansion if the RBI relaxes prior‑approval requirements for new branches. This competitive push is reshaping distribution models and expanding service access across urban and semi‑urban locations.

Operational Efficiency and Branch‑Level Productivity

Branch productivity has emerged as a key differentiator for lenders operating in the gold loan market. Muthoot FinCorp reports an average assets‑under‑management (AUM) of ₹281 million per branch, a figure significantly above industry peers.

Higher per‑branch AUM reflects efficient customer acquisition, lower operating costs and optimised loan processing systems. These performance indicators highlight strong operational discipline among leading gold‑focused NBFCs.

Rising Gold Prices Strengthen Market Dynamics

Gold prices have risen 17% year‑to‑date, providing additional support to loan valuations and borrowing limits. Higher collateral values allow customers to access larger loan amounts without increasing risk for lenders.

The rise in gold prices also boosts the attractiveness of gold loans as a short‑term liquidity tool for both individuals and businesses. These market conditions continue to reinforce the sector’s expansion across product categories.

Read More: FM Says Gold Demand Remains Within Traditional Trends as RBI Flags Stable External Sector.

Conclusion

India’s gold loan sector has entered a period of robust expansion supported by high gold prices, increased customer adoption and a rapidly growing lender network. The sharp rise in both retail and bank gold loans underscores the depth of demand across borrower categories.

Operational efficiency and strong branch‑level performance continue to enhance competitiveness for major NBFCs. With structural changes underway, gold loans are increasingly embedded in mainstream financial planning for businesses and households.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.