Gold-Backed Lending: A Rapidly Growing Credit Segment in India

Transforming Landscape of Gold Loans

Gold-backed lending is swiftly evolving from a specialized borrowing option to one of the most rapidly expanding credit sectors in India. A recent report by Experian reveals that gold loans experienced an impressive 84% year-on-year growth in FY26, establishing them as the fastest-growing credit product in the nation. The report, titled ‘Gold Loans in Transition: Market Evolution & Consumer Patterns’, emphasizes how consumers are increasingly utilizing their household gold assets to secure formal financing. Once primarily seen as a last-resort borrowing method, gold loans are now becoming a mainstream credit source for both personal and business purposes.

Experian highlighted a significant transformation in India's retail lending landscape, with gold loans gaining traction among a diverse array of borrowers. The report indicated that the growth in sourcing value surged from 69% in FY25 to 84% in FY26, reflecting heightened demand and broader market acceptance. The total outstanding gold loan portfolio also saw remarkable growth, escalating from Rs 6.3 lakh crore in March 2023 to Rs 19.4 lakh crore by March 2026. This expansion was bolstered by increased borrowing amounts, rising customer confidence, and active participation from banks, non-banking financial companies (NBFCs), and specialized gold lenders.

Manish Jain, Country MD of Experian India, commented on this trend, stating, 'This is fostering greater financial inclusion while enabling consumers to address a wide range of personal and livelihood needs. We are witnessing clear evidence that gold loans are becoming an increasingly vital gateway to formal credit for a broader spectrum of consumers.'

Impact of Rising Gold Prices on Borrowing

Rising Gold Prices Fuel Larger Borrowing

A significant factor driving the growth of this segment has been the notable rise in gold prices. As the value of pledged gold increases, borrowers can secure larger loans without needing to provide additional collateral. During the analyzed period, the gold price index surged by 144%, while the values of sanctioned gold loans skyrocketed by over 200%. The average loan size nearly doubled from Rs 0.98 lakh in FY23 to Rs 1.96 lakh in FY26, indicating a growing inclination towards higher-value borrowing.

The report also noted that the quality of portfolios remained robust despite rapid growth. The net delinquency rate for loans overdue by more than 90 days improved from 0.4% in March 2023 to 0.2% in March 2026, suggesting that lenders have upheld disciplined risk management practices while expanding their portfolios.

Expansion Beyond Traditional Markets

Growth Expands Beyond Traditional Strongholds

Historically, southern states have dominated the gold loan market; however, recent data shows significant growth in newer regions. Uttar Pradesh, West Bengal, Rajasthan, and Maharashtra have emerged as key growth areas in FY26. Year-on-year sourcing growth reached 138% in Uttar Pradesh, 112% in West Bengal, 105% in Rajasthan, and 102% in Maharashtra. This trend reflects a growing acceptance of gold-backed borrowing nationwide and indicates a broader expansion across the country.

Priority Sector Gold Loans (PSGLs) have also played a crucial role in enhancing inclusion, accounting for nearly 23% of total sourcing value in FY26. These loans have expanded access to formal credit in rural, semi-urban, and underserved communities. 'The segment continues to support formal credit access across rural, semi-urban, agricultural, and underserved borrower communities. By unlocking the value of household gold, PSGLs are helping convert dormant assets into productive capital, especially benefiting women-led households, micro-enterprises, and livelihood generation,' the report stated.

Consumer Confidence and Repeat Borrowing

Repeat Borrowing Signals Growing Consumer Confidence

Experian’s findings indicate a shift in consumer behavior alongside market growth. An increasing number of borrowers are combining gold loans with other credit products, with the percentage of such customers rising from 10% in December 2021 to 17% by December 2025. Customer retention is also on the rise, with nearly 75% of gold loan customers sourced in the fourth quarter of FY26 being repeat borrowers. This suggests that many households now perceive gold loans as a recurring financial tool rather than merely an emergency option.

'Experian's analysis of borrower and lender trends indicates that gold loans are now emerging as an important component of formal credit expansion and financial inclusion, moving beyond their traditional role as an emergency credit instrument,' the report concluded. It also noted that while growth opportunities remain significant, the long-term sustainability of the sector will rely on maintaining responsible lending standards and prudent risk management as participation continues to broaden.