The vast amount of gold held by Indian households is driving rapid expansion in the country's gold-backed loan business and gradually reshaping the retail credit market landscape.
According to a Morgan Stanley report from last October, Indian households hold more than 34,000 tonnes of gold. Kotak Mahindra Bank estimates these gold assets are worth approximately $5 trillion.
At a time when other consumer credit growth is slowing, gold loans have become one of India's fastest-growing retail credit segments. Analysts believe several factors are driving this market's rapid growth: regulatory tightening of unsecured lending rules, a sharp rise in international gold prices, improved loan accessibility, and increased financial pressure on some households.
Shripad Jadhav, head of gold loan business at Kotak Mahindra Bank, stated that about 90% of Indian households' gold reserves remain idle. However, gold-backed financing is beginning to profoundly change India's retail financial ecosystem and attracting international capital attention.
Global private equity firm Bain Capital has recently made a significant bet on India's gold loan market, planning to acquire up to 41.7% of shares in Manappuram Finance, India's second-largest gold loan provider. This transaction received approval from the Reserve Bank of India last month, indicating international investors are optimistic about this traditional, yet long-underutilized, asset class in India.
In December last year, Japanese financial giant Mitsubishi UFJ Financial Group also announced the acquisition of a 20% stake in Indian shadow bank Shriram Finance, which plans to expand its gold loan business.
Data from the Reserve Bank of India shows that gold loan outstanding amounts reached 4 trillion rupees (approximately $43.3 billion) in January 2026, more than doubling from 1.75 trillion rupees a year earlier. Gold-backed loans have now become the third-largest category of retail loans in India, after housing and auto loans, and are the fastest-growing retail credit segment.
However, market participants believe official data may underestimate the actual market size. Yan Wang, Chief Emerging Markets Strategist at Alpine Macro, stated that the actual size of India's gold loan market is estimated to be around 14 trillion rupees, while the central bank's data only covers personal gold loans issued by some commercial banks.
Furthermore, a Macquarie report last month pointed out that non-banking financial companies (NBFCs) account for 45% to 50% of India's total gold loan market, and this portion of business is not fully captured in the central bank's statistics.
Rising Demand for Gold Loans Hanna Luchnikava-Schorsch, Head of Asia Pacific Economic Research at S&P Global Market Intelligence, stated that since the Reserve Bank of India began tightening regulations on unsecured loans at the end of 2023, many small business owners and individual borrowers have found it significantly harder to obtain such credit.
She noted that the growth rate of personal loans in India has slowed from an average of 30% in the six months leading to December 2023 to 12.2% in 2025. Meanwhile, international gold prices have continued to climb. Since 2024, gold has accumulated gains of over 140%, breaking through $5,000 per ounce and repeatedly hitting record highs this year.
Analysis suggests that rising gold prices mean borrowers can obtain larger loans against the same quantity of gold, significantly enhancing the appeal of gold loans.
In the past, demand for gold loans in India was concentrated mainly in southern states and semi-urban areas, particularly among agricultural populations. However, industry insiders note that this trend has now expanded nationwide.
Jadhav mentioned that middle-class and high-net-worth individuals in major Indian cities are increasingly using gold loans to meet urgent funding needs.
Persisting Risk Concerns In this wave of gold loan growth, non-banking financial institutions like Manappuram Finance and industry leader Muthoot Finance have been the primary beneficiaries. Over the past year, their stock prices have risen by 24% and 47% respectively, significantly outperforming the benchmark Nifty 50 index.
Shreya Shivani, a non-bank financial analyst at Nomura, stated that most NBFCs can disburse loans within an hour of a customer visiting a branch. Even borrowers with lower credit scores can secure financing at rates significantly lower than unsecured personal loans, provided they hold gold of sufficient purity.
However, the market remains cautious about this rapidly expanding lending sector. As gold loans somewhat bypass traditional credit assessment procedures, their rapid growth may reflect increased financial pressure on some households and individual businesses. Macquarie's report also noted that households feeling financially squeezed, with income growth lagging behind living costs, is a key reason for the rising demand for gold loans.
Jadhav holds a more positive view on this. He stated that the growth in gold loans is "a sign of increasing financial maturity," meaning residents are beginning to actively utilize their precious metal assets as a convenient, fast, and low-cost financing tool.
Market Focus on India's Energy Security and Inflation Trends Beyond the financial sector, India is also facing heightened external energy risks. Shortly after Iran's new supreme leader vowed to continue closing the Strait of Hormuz, Indian Prime Minister Narendra Modi spoke with Iranian President Pezeshkian, indicating New Delhi is actively addressing potential energy supply risks.
Simultaneously, as India's relationships with the United States and Israel deepen, its traditional ties with Iran are being tested. While significant oil volumes still flow to China via the Strait of Hormuz, India has yet to secure safe passage guarantees for its vessels stranded in this critical waterway.
On macroeconomic data, Indian consumer inflation has risen for the fourth consecutive month. Data shows India's CPI increased by 3.21% year-on-year in February, higher than the previous 2.75% and in line with economist expectations in a Reuters poll.
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