Gold loans drive NBFC retail credit surge with 70% growth
Non-banking financial companies (NBFCs) are witnessing a sharp rise in retail credit, led by a surge in gold-backed loans. According to the latest data from the Reserve Bank of India (RBI), outstanding loans against gold jewellery have increased by 69.9% year-on-year to Rs 3.29 lakh crore as of May 2025, compared to Rs 1.94 lakh crore in May 2024.
This growth far outpaces the overall retail loan growth of 19.5% for NBFCs during the same period. Gold loans now account for 5.6% of total NBFC loans, up from a smaller share a year ago. Retail loans overall make up 43% of NBFC loan portfolios.
The surge in gold loan demand is attributed to rising gold prices, which have incentivised borrowers to leverage their existing jewellery holdings for secured credit. Over the past two years, gold loan outstanding has jumped 136% from Rs 1.4 lakh crore in May 2023.
Industry analysts note that gold loans are considered secured lending, reducing risk for NBFCs. However, the rapid growth also raises questions about borrower vulnerability if gold prices decline. The RBI keeps a close watch on the asset quality of such loans.
The trend reflects a broader shift towards collateralised borrowing amid economic uncertainties, with gold serving as a reliable asset for both lenders and borrowers.
