Gold loans shift from emergency borrowing to planned finance

The latest Reserve Bank of India (RBI) data points to a significant shift in consumer borrowing behaviour, with non-banking financial companies' (NBFCs) lending against gold jewellery surging 69.3% year-on-year in June 2026. The latest data shows gold-backed lending continuing to significantly outpace overall retail credit.

Outstanding NBFC credit against gold jewellery stood at ₹3.41 lakh crore at the end of June 2026, up 69.3% from a year earlier. Overall retail credit grew 20.3% year-on-year during the month.

“There are several reasons for the growth in the demand for gold loans, which include a preference for short-tenure secured loans amongst borrowers. In addition to the rise in the price of gold, which is significant in unlocking the value of gold jewellery, there are many other reasons that have contributed to the same trend. For example, borrowers' perception regarding gold loans has changed significantly," said Puja Abhishek Singh.

"Earlier, borrowers availed gold loans only as an emergency funding option. However, today, borrowers view gold loans not only as an emergency measure but also as an asset for planned expenses, such as managing their working capital, paying for education, or meeting other immediate liquidity requirements. This shift in approach has also played an important role in the increasing popularity of gold loans.

Access to formal sources of credit has also been very important for generating demand. Digital onboarding, quick loan approval, and minimal documentation have helped make gold loans more accessible to a larger number of people. With the ease of availability of credit through formal means, gold loans are now contributing to financial inclusion. For many Indians, gold is no longer just a store of value; it is also becoming a useful financial asset that can provide access to funds when needed,” Singh said.

The trend is also reflected in the outlook of public sector lenders. Indian Bank expects its gold loan portfolio to cross ₹1.5 lakh crore during the current financial year, up from around ₹1.25 lakh crore currently.

Indian Bank MD and CEO Binod Kumar said the gold loan segment is likely to grow about 20% this year.

“Gold loan is safe lending for banks...it is not a consumption loan, but mostly it is income-generating and also helps small businesses to grow. Last year, we saw very significant growth of 30 per cent in the segment due to a jump in gold prices. It will be slower this year as there is a 30 per cent decline in gold prices,” Kumar told PTI in an interaction.

The shift suggests that gold loans are increasingly being viewed not merely as a means of raising emergency cash, but as a flexible source of short-term finance for households, students and small businesses.