Key Points

Further, the market is anticipated to grow to Rs 18 trillion (Rs 18 lakh crore) by FY27, driven by rising gold prices, the report from credit ratings agency ICRA said.

A.M. Karthik, senior vice president and co-group head financial sector ratings, ICRA Limited, said that the slowdown in the growth of unsecured loans also contributed to the increase in the gold-loan assets managed by NBFCs.

The report foresees the NBFC gold loan asset under management (AUM) to expand by 30-35 per cent in FY2026, also buoyed by diversification by players into this space and a sizeable estimated free gold-hold in the country, he added.

Gold loans had expanded at a compounded annual growth rate (CAGR) of about 26 per cent during FY2024-FY2025 and stood at Rs. 11.8 trillion as of March 2025, with banks showing a slightly higher expansion rate vis-a-vis NBFCs, the report added.

Banks remain the dominant player with 82 per cent market share in overall gold loans with NBFCs contributing to the rest, ICRA said.

Growth in overall gold loans was primarily fuelled by agriculture and other loans secured by gold jewellery, which were extended by banks. However, this segmental growth slowed significantly in FY2025 as banks imposed stricter eligibility criteria and reclassified some of these loans under the retail or personal category, the ratings agency said.

"NBFCs focused on gold loans maintain their robust lending spread, supported by improving operational efficiencies and moderate credit losses, which sustain their net earnings. Nevertheless, competitive intensity is steadily increasing from new entrants and the ongoing expansion of banks in this segment, resulting in potential yield pressures for market participants," Karthik explained.

Consequently, continuous enhancement of operating efficiencies will be crucial for these players to build adequate buffers against such yield pressures, he added.

- IANS