Gold Loans Double Amid Price Surge, RBI Flags Risk of Correction
The unprecedented rise in gold prices over the last year has driven a sharp increase in loans against the yellow metal, prompting experts to suggest a structural shift in borrowing behaviour. Data from the Reserve Bank of India (RBI) show that gold loans from non-banks surged 70% year-on-year to Rs 3.3 lakh crore as of May, while bank gold loans jumped 105% to Rs 5.1 lakh crore.
According to Simranjeet Singh, CEO of SME and retail verticals at Anand Rathi Global Finance, the share of prime and above-prime borrowers taking gold loans has risen from 43% to 52%. This, he says, indicates that gold loans are now seen as a mainstream financial tool rather than a last resort. Borrowers are using these loans for business expansion, travel, and higher education, while some existing borrowers have taken advantage of higher prices to secure larger loans and roll over debt.
The RBI’s Financial Stability Report noted that the rapid growth in gold loans has coincided with a decline in personal loan outstanding for borrowers who hold both types of loans, particularly among sub-prime borrowers. This suggests a possible substitution effect, with borrowers preferring secured gold loans over unsecured personal loans.
TransUnion CIBIL data reveal that the share of gold loans in total loans for banks and non-banks increased to 11.1% in December 2025, second only to housing loans, up from 5.9% in March 2022. This growth occurred before the January 2026 price surge that pushed global gold prices to all-time highs of around $5,500 per ounce.
However, with gold prices now around $4,000 per ounce, the RBI has flagged concerns over price volatility. “A prolonged correction in gold prices could weaken collateral protection, increase borrower stress, and result in higher delinquencies,” the central bank warned. Analysts note that while gold is no longer seen solely as a rainy-day hoard, its role as leverage in a sluggish wage growth environment carries risks.
Despite these concerns, lenders remain optimistic. Singh of Anand Rathi believes the shift towards secured lending is structural, and the gold loan segment is likely to continue growing, albeit at a moderated pace.
