Gold Loans: India’s Fastest-Growing Credit Segment

Indians are increasingly pledging gold, with outstanding bank loans against the metal more than doubling in the year leading to March 2025. According to RBI data, loans jumped 103% from just over Rs 1 lakh crore to nearly Rs 2.1 lakh crore. This surge has made gold loans the fastest-growing segment, even as overall bank credit growth decreased to 11% in FY25 from 20% the previous year.

Apart from gold loans, the second fastest-growing category was loans against securities, which rose by 18.7% to reach ₹10,080 crore. This decrease was mainly due to lenders reassessing their exposure to unsecured personal loans. Home loans made up 16.5% of total personal loans, with a portfolio valued at ₹30.1 lakh crore. Meanwhile, the other personal loans segment, primarily comprising unsecured loans, saw a growth of 7.9%.

The sharp rise in gold loan lending can be traced back to the aftermath of the pandemic years, when many individuals, particularly in rural and semi-urban areas, were left with limited financial options. With savings exhausted and incomes disrupted, pledging gold, often the only readily available asset, became a crucial lifeline for households needing immediate liquidity. Additionally, regulatory mandates like the Reserve Bank of India’s Priority Sector Lending (PSL) norms have encouraged banks to increase credit flow to underserved sectors. Several large private and multinational banks have formed strategic partnerships with regional rural banks and cooperative institutions to meet these PSL targets, especially in rural lending. These collaborations have facilitated credit disbursal under various categories such as agriculture, animal husbandry, dairy, and poultry, often backed by gold as collateral, thus further propelling the growth in gold-backed loans.

Impact on Overall Credit Growth:

Despite the surge in gold loans, overall bank credit growth slowed. Outstanding bank credit stood at ₹182 trillion at the end of March 2025, with adjusted growth slowing to 12% from 16.3% in the previous year. The industrial sector, in particular, experienced a dip in credit growth, with lending to large industries increasing by only 6.2%, down from 6.4% in FY24.

Composition of Bank Lending

The composition of bank lending continued to shift:

• Industry: The share of credit to the industrial sector fell further to 21.5%.
• Services: The services sector’s share rose to 28.3%.
• Personal Loans: Personal loans accounted for 32.6% of all credit, up from 32.4%, driven by the increase in gold loans.
• Home Loans: The share of housing loans remained steady at 16.5%.

Notably, loans against gold jewellery now make up 1.1% of total bank credit, nearly doubling from 0.6% a year ago. This surge highlights a shift toward asset-backed borrowing, supported by easy-to-use tools such as the gold loan EMI calculator, which help borrowers plan their monthly outflows with precision.

Other Retail Loan Segments

• Loans Against Securities: This segment saw robust growth of 18.7% to ₹10,080 crore, making it the second fastest-growing category after gold loans. Borrowers increasingly use a Loan against Securities EMI calculator to determine the viability of such investments.
• Consumer Durables: This category experienced a decline of 1.3% to ₹23,402 crore, primarily due to lenders reviewing their exposure to unsecured personal loans.
• Home Loans: Representing 16.5% of personal loans, the home loan portfolio stood at ₹30.1 lakh crore. Here, many individuals rely on a personal loan EMI calculator to gauge monthly affordability before making large financial decisions.
• Other Loans: This segment, largely made up of unsecured loans, saw a growth of 7.9%. With increased scrutiny from lenders, many borrowers are opting for secure alternatives and consulting calculators like the loan against Securities EMI calculator to manage risk better.

Factors Driving the Gold Loan Boom

Several key factors contributed to this unprecedented rise:

1. Reclassification of Agricultural Loans: In 2023, the Reserve Bank of India (RBI) directed banks to reclassify many agricultural loans as loans against gold jewellery. This reclassification inflated the gold loan figures, as farm loans typically enjoy lower interest rates and more lenient repayment terms.
2. Regulatory Shifts: The RBI’s restrictions on gold lending by large non-bank finance companies (NBFCs) redirected borrowers towards traditional banks, further boosting gold loan volumes.
3. Rising Gold Prices: An increase in gold prices enhanced the borrowing capacity of individuals, as banks offer loans based on the value of pledged jewellery. This allowed borrowers to access larger amounts of credit.
4. Shift from Unsecured Loans: With the RBI increasing the risk weight for unsecured loans, banks became more cautious in their lending practices. Consequently, borrowers turned to secured loans like gold loans, which are perceived as safer for lenders.

Conclusion

The significant rise in gold loans reflects a broader shift in India’s borrowing patterns. As individuals seek secured lending options amidst regulatory changes and economic uncertainties, gold loans have emerged as a preferred choice. Digital tools like the gold loan EMI calculator, personal loan EMI calculator, and loan against securities EMI calculator facilitate this trend. This trend underscores the evolving dynamics of India’s financial landscape, where traditional assets like gold are pivotal in shaping credit markets.