Gold loan book surges 4x to ₹18.6 lakh crore in five years, overtakes personal loans as No. 2 retail asset

India’s organised gold loan market has expanded nearly fourfold over the past five years to ₹18.6 lakh crore as of March 2026, making it the second-largest asset class in the retail lending segment, according to a latest report by Motilal Oswal.

Gold loans have displaced personal loans to become the second-largest retail lending category after home loans, accounting for 15.7% of consumption loans, according to CRIF data. Among banks, retail gold loans have surged at a CAGR of 78% over the past three years, making them the fastest-growing retail asset class, the report noted.

“The resurgence in gold lending is driven by a combination of improved processes, aggressive expansion and a strong uptrend in gold price,” it said.

The brokerage expects the industry’s gold loan book to grow at a compound annual growth rate (CAGR) of 28% during FY26-FY28, crossing ₹30 lakh crore by March 2028. It said lower penetration among households, greater acceptance of gold loans and the entry of more banks and diversified non-banking finance companies (NBFCs) should support the segment’s structural growth.

Only 8% of household gold tapped for loans, leaving vast room for growth

The report noted that growth opportunity remains significant, given the large quantity of gold held by Indian households. Households are estimated to own around 28,000 tonnes of gold worth ₹380-390 lakh crore. However, only about 8% of this stock has been monetised through the organised gold loan market, assuming an average industry loan-to-value ratio of around 60%.

Household savings also remain heavily skewed towards physical assets. Physical assets accounted for 64% of household savings in FY25, while savings in the form of gold and silver ornaments rose 27% to ₹2.18 lakh crore.

Gold loans are also gaining acceptance among micro, small and medium enterprises (MSMEs), microfinance borrowers and personal loan customers. For MSMEs and semi-formal borrowers, gold loans offer faster disbursal, flexible repayment structures and limited documentation. Among commercial borrowers, gold loans are one of the preferred financing options for 17%, the report said.

For microfinance borrowers, gold loans offer higher ticket sizes at relatively lower interest rates. Among MFI customers who also access other retail credit products, gold loans account for the largest share at 18%.

PSBs command 60% gold loan market share

The competitive landscape is also changing, with public sector banks (PSBs), gold-focused NBFCs and regional banks expanding their presence, while large private banks and diversified NBFCs are increasingly scaling up their gold loan operations.

As per the report, PSBs command around 60% of the overall gold loan market, including agriculture-linked gold loans, while the market share of gold-focused NBFCs increased from 6% in November 2023 to 8% in November 2025.

Motilal Oswal expects large private banks and diversified NBFCs to gain market share in higher-ticket gold loans as they expand their branch networks and invest in the segment. Meanwhile, established gold-focused lenders such as Muthoot and Manappuram Finance are expected to cede some market share.

“Going forward, we expect large private banks and diversified NBFCs to rapidly scale up their gold loan operations and network, while GL-NBFCs will lose some market share,” it said.

The brokerage expects gold loan margins to moderate as competition intensifies, although profitability should remain healthy. It maintains a Neutral rating on Muthoot Finance and Manappuram Finance, while its top picks in the space include ICICI Bank, State Bank of India, Kotak Mahindra Bank, AU Small Finance Bank, Bajaj Finance and L&T Finance.

While asset quality remains robust across lenders, the report flagged repeat borrowing and the risk of overleveraging as key concerns. Stagnation in gold tonnage and new customer additions will also remain important monitorables as the industry enters its next phase of growth, the brokerage said in its report.