The sector is experiencing growth, with gold loan disbursals soaring by 51% in September alone.
In comparison, personal loans saw a modest growth of just 11.4%.
This surge is driven by the speed, flexibility, and affordability that gold-backed loans offer.
These factors make gold loans an attractive alternative to personal loans and credit cards.
Partha Sengupta, COO of Radian Finserv, explains the growing appeal.
“Gold loans provide a quick approval process, often within an hour, and come with lower interest rates—typically 16-21%, compared to 24%+ for credit cards,” he says. “They don’t require a good CIBIL score, and borrowers can get flexible repayment terms without mandatory monthly payments.”
Gold loans are secured against the value of the pledged gold, making them accessible to more people, especially those without a strong credit history.
With daily interest accrual, borrowers have greater control over repayment.
Rising gold prices fuel loan disbursals
Rising gold prices have further boosted gold loan disbursals. The higher gold prices allow borrowers to unlock more value from their gold, making it easier to secure larger loan amounts or top-up existing loans.
“The growing value of gold increases the collateral’s worth, making these loans even more appealing,” Sengupta notes.
As gold prices continue to rise, the collateral becomes more valuable, offering borrowers even greater access to financing.
Key market trends: Bank dominance and NBFC growth
The gold loan market is also showing distinct trends. Public sector banks dominate the sector, especially with their agriculture loans secured by gold jewelry. Meanwhile, non-banking financial companies (NBFCs) are expanding their gold loan portfolios by 17-19% in FY2025.
This shift signals an increase in competition and a broader range of options for borrowers.
Despite some growth in NBFC gold loan yields, they are expected to remain lower than the peak levels seen 4-5 years ago.
This yield moderation is part of the market’s natural adjustment, as increased competition and a larger supply of loans balance out the returns.
Wedding season drives demand for gold loans
Gold loans typically see a spike during the wedding season, and this year is no exception.
“Gold loans are particularly popular during weddings because they provide quick access to funds and can be closed immediately,” Sengupta says. “The ability to pay interest daily makes them an ideal solution for short-term financing, especially for weddings, house construction, or urgent business credit.”
Risk management and NPA concerns
Despite the surge in gold loan uptake, the risk of rising Non-Performing Assets (NPAs) remains low.
“Gold loans typically operate with a conservative loan-to-value (LTV) ratio of around 75%,” Sengupta explains. “Even with interest accrual over six months, the exposure remains capped, providing a solid buffer.”
Rising gold prices further enhance the safety margin for lenders.
Managing volatility in gold prices
Lenders are adept at managing risks during periods of gold price volatility. “We monitor the value of pledged gold closely and may take proactive measures such as recalling loans or asking borrowers to deposit additional funds if there’s a sharp drop in gold prices,” Sengupta says.
In more severe cases, lenders may initiate early auctions of pledged gold to mitigate potential losses and ensure the loan is properly secured.
These strategies allow lenders to minimise the impact of price fluctuations.
A look at gold loan rates of some of the lenders
| Name of the Bank | Interest Rate | Loan Amount |
| Axis Bank Gold Loan | 17% p.a. onwards | ₹25,001 to ₹25 lakh |
| HDFC Gold Loan | 9.30% p.a. to 17.88% p.a. | ₹25,000 onwards |
| Canara Bank Gold Loan | 9.25% p.a. (MCLR) | ₹5,000 to ₹35 lakh |
| Muthoot Gold Loan | 10.90% p.a. | ₹1,500 onwards |
| SBI Gold Loan | 10.20% p.a. onwards | ₹20,000 to ₹50 lakh |
| Kotak Mahindra Gold Loan | 9.00% p.a. – 24.00% p.a. | ₹20,000 to ₹1.5 crore |
| IndusInd Bank Gold Loan | 10.35% – 17.05% | Up to ₹20 lakh |
| Manappuram Gold Loan | 21% p.a. to 26% p.a. | As per the requirement of the scheme |
| Bank of Maharashtra Gold Loan | 9.30% p.a. onwards | Up to ₹25 lakh |
| PNB Gold Loan | 9.15% p.a. | ₹25,000 to ₹25 lakh |
| Bank of Baroda Gold Loan | 9.15% p.a. | Up to ₹50 lakh |
(Source: Bankbazaar)