Gold loans extended by non-banking financial companies (NBFCs) witnessed a sharp rise in May, with outstanding loans growing nearly 70% year-on-year, making it the fastest-growing segment in the country’s retail lending market.
According to the latest data released by the Reserve Bank of India (RBI), strong demand for loans against gold jewellery has been driven by record-high gold prices and the quick availability of credit. As the value of pledged gold has increased, borrowers have been able to secure larger loan amounts without needing additional collateral.
Industry experts said households, small traders and self-employed individuals are increasingly turning to gold loans to meet short-term financial needs. Compared with unsecured personal loans, gold loans are processed faster, carry lower interest rates and require minimal documentation, making them an attractive financing option.
The rapid expansion has also been supported by aggressive branch expansion by leading gold loan companies and NBFCs, particularly in semi-urban and rural areas where gold remains a preferred household asset. Lenders have strengthened their distribution networks and digital services to attract more borrowers.
The surge comes at a time when the RBI is closely monitoring lending practices in the sector. Earlier this year, the central bank proposed tighter guidelines on gold-backed lending to ensure prudent risk management, improve transparency and strengthen customer protection. Industry participants, however, have sought clarity on certain provisions, saying overly restrictive norms could affect access to formal credit.
Despite regulatory scrutiny, the outlook for the segment remains positive. With gold continuing to be one of the most trusted financial assets in Indian households, lenders expect sustained demand for loans backed by jewellery, reinforcing the importance of gold finance in the country’s retail credit ecosystem.
Analysts believe demand for gold loans is likely to remain healthy as long as gold prices stay elevated and consumers continue to seek quick, secured financing. The festive season and higher rural borrowing requirements could further support growth in the coming months.
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