India's Gold Loan Growth Driven by Higher Prices and Repeat Borrowers, Report Shows

The rapid growth in India's gold loan market is increasingly being driven by higher gold prices and repeat borrowing by existing customers, according to a recent thematic report by Motilal Oswal. Rather than a significant rise in new borrowers or an increase in the physical quantity of gold being pledged, lenders are extending larger loans due to the sharp appreciation of gold valuations.

The report highlights that the combined quantity of gold pledged with major industry players Muthoot Finance and Manappuram Finance has remained steady at around 260 to 265 tonnes over the past couple of years. Similarly, their combined customer base has stayed at approximately 9 million, even as total loans outstanding have surged.

"Recent AUM growth has thus been driven largely by higher gold valuations and repeat borrowings rather than new customer acquisition or incremental collateral mobilisation," the report stated.

A key concern highlighted in the report is the rising share of repeat customers within the sector. Existing customers accounted for 82 per cent of gold loan originations in 2025, compared to 76 per cent in 2022. Furthermore, individuals who already held an active gold loan accounted for 90 per cent of total originations.

"The portfolio growth is thus increasingly being driven by repeat borrowing and top-up loans, posing a risk of overleveraging in the sector," Motilal Oswal noted.

Despite these structural concerns, asset quality across the sector has remained healthy. Early-stage delinquencies among non-banking financial companies (NBFCs) improved to 0.56 per cent in March 2026, down from 2.15 per cent in March 2025.

Overall, the Indian gold loan market has expanded nearly four times over the past five years, reaching ₹18.6 lakh crore as of March 2026. The sector recorded a 50 per cent year-on-year growth rate in fiscal year 2026, supported by a 60 per cent rise in gold prices alongside steady consumer and business demand.

Looking ahead, Motilal Oswal projects continued strong growth for the sector, estimating a compound annual growth rate (CAGR) of 28 per cent between FY26 and FY28. The industry's total gold loan book is expected to cross ₹30 lakh crore by March 2028.

However, analysts emphasize that stagnant gold tonnage, limited additions of new customers, and a heavy reliance on repeat borrowers will remain critical factors to monitor as the industry scales.

"The expansion of India's gold loan market to ₹18.6 lakh crore demonstrates the deep reliance on gold as a liquid asset for consumption and business needs. However, as noted in the report, growth driven primarily by asset revaluation and repeat top-up loans rather than new customer acquisition introduces concentration and overleveraging risks. Financial institutions must carefully monitor borrower debt-servicing capabilities to ensure long-term stability, even as asset quality currently remains robust." — Dr. Shishir Gupta, Founder & CEO, StartupLanes