Loans against gold jewelry have witnessed a sharp surge over the past year, with their share in banks’ retail credit doubling to 6% in January, according to data released by the Reserve Bank of India (RBI).
Outstanding gold loans rose 128.8% year-on-year (Y-o-Y) to nearly ₹4 trillion in January, reflecting the strong rally in gold prices and rising demand for secured borrowing. In comparison, the segment had grown by just over 91% during the same period last year, when the outstanding portfolio stood at ₹1.75 trillion.
The rapid expansion has significantly increased gold loans’ weight in the overall retail loan book of banks. Their share has doubled from 3% in January last year to 6% this year, underscoring the growing importance of the segment in retail lending.
The spike in gold-backed borrowing mirrors the sharp rise in domestic gold prices, which has enhanced the collateral value of jewelry pledged by borrowers. Higher gold valuations allow customers to access larger loan amounts against the same quantity of gold, making such loans an attractive and quick source of liquidity.
Gold loans are typically considered lower-risk for lenders due to the tangible collateral and shorter repayment tenures. The segment has also benefited from increased demand among households and small businesses seeking funds amid broader economic uncertainties.
The latest RBI data indicates that gold loans are emerging as one of the fastest-growing components of retail credit. With gold prices remaining elevated, analysts expect demand for such loans to stay strong in the near term, although the pace of growth may moderate from the exceptionally high levels seen this year.
The surge highlights how fluctuations in commodity prices can directly influence credit patterns within the banking system.
Gold Loan Share in Bank Retail Credit Doubles to 6% Amid Price Surge: RBI
