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The rapid growth in India's gold loan market is increasingly being driven by higher gold prices and repeat borrowing by existing customers rather than a significant rise in new borrowers or the amount of gold being pledged, according to a Motilal Oswal thematic report on the gold loan sector.
The report said the combined quantity of gold pledged with Muthoot Finance and Manappuram Finance has remained around 260-265 tonnes over the past couple of years, while their combined customer base has stayed around 9 million despite a surge in loans outstanding. "Recent AUM growth has thus been driven largely by higher gold valuations and repeat borrowings rather than new customer acquisition or incremental collateral mobilization," the report said. The trend means that the sharp rise in gold prices has increased the value of gold already pledged by customers, allowing lenders to extend larger loans without a corresponding increase in the physical quantity of gold being pledged. The report also flagged the rising share of repeat customers as a key risk for the sector. Existing customers accounted for 82 per cent of gold loan originations in 2025, up from 76 per cent in 2022. Customers who already had a gold loan accounted for 90 per cent of originations. "The portfolio growth is thus increasingly being driven by repeat borrowing and top-up loans, posing a risk of overleveraging in the sector," Motilal Oswal said. Despite these concerns, the report said asset quality has remained healthy. Early-stage delinquencies among NBFCs improved to 0.56 per cent in March 2026 from 2.15 per cent in March 2025. The overall gold loan market has expanded nearly four times over the past five years to Rs 18.6 trillion as of March 2026 and recorded 50 per cent year-on-year growth in FY26, supported by a 60 per cent rise in gold prices and demand for loans for consumption and business purposes. Motilal Oswal expects the sector to continue growing strongly, estimating a compound annual growth rate of 28 per cent between FY26 and FY28, with the industry's gold loan book crossing Rs 30 trillion by March 2028. However, it said stagnant gold tonnage, limited additions of new customers and the rising share of repeat borrowers will remain key factors to watch as the industry expands. "Asset quality has remained robust across lenders; however, a higher number of repeat borrowers does pose a threat of overleveraging in the sector," the report said. (ANI)
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