Gold Loan NBFCs Ride Rally: India’s gold loan non-banking financial companies (NBFCs) are witnessing an unprecedented growth surge, driven by soaring gold prices and tighter credit conditions in unsecured and microfinance segments. As borrowers face limited options in personal loans and credit cards, gold loans have emerged as a preferred source of liquidity, prompting NBFCs to raise their full-year disbursement and AUM growth targets.
George Alexander Muthoot, MD of Muthoot Finance, highlighted the robust demand, noting, “We had guided for 15% growth in advances last year, but ended up reaching 40%. This year, we have also given a guidance of 15%, but we should be doing much more than that.” The company reported a 40% year-on-year rise in gold loans, reaching ₹32,272 crore in Q1FY26, taking its standalone AUM to a record ₹1,20,031 crore.
The rising popularity of gold loans is closely linked to constraints in other credit segments. Lenders in unsecured areas, including credit cards and microfinance, have tightened lending, leaving many borrowers with gold loans as the only viable option. RBI data corroborates this trend, showing outstanding loans against gold jewellery surged 122% year-on-year to ₹2.94 lakh crore as of July 2025, compared with just a 6% increase in credit card loans and 8% growth in personal loans.
Why Gold Loans Are Becoming the Go-To Option
Tight Credit in Other Segments
As banks and NBFCs restrict unsecured lending, customers with limited or no credit history are increasingly turning to gold loans. Shaji Varghese, CEO of Muthoot FinCorp, said, “Growth is being fuelled by customers without strong credit histories, new-to-credit borrowers, and expanding access to digital gold loans.” This segment has become critical in maintaining the momentum for gold loan NBFCs.
Record Gold Prices Fueling Demand
High gold prices are further boosting demand. On Friday, 22k gold closed at ₹1,02,000 per 10 grams and 24k gold reached ₹1,11,280, with MCX gold nearly hitting its all-time high of ₹1,09,656. Manish Mayank, Head of Gold Loan Business at IIFL Finance, stated, “The recent rally in gold prices has naturally resulted in a spike in demand for gold loans, as customers look to leverage the increased value of their assets for liquidity needs.”
Financial Highlights of Gold Loan NBFCs
Muthoot Finance
- Standalone AUM: ₹1,20,031 crore in Q1FY26
- Gold Loan Disbursement: ₹32,272 crore (40% YoY growth)
- Guidance for FY26: Initially 15%, expected to exceed this target
Muthoot FinCorp
- Standalone AUM: ₹36,787 crore (47% YoY growth)
- Disbursements: ₹28,159 crore (63% YoY growth)
IIFL Finance
- Loan AUM: ₹83,889 crore (21% YoY growth in Q1FY26)
- Strong growth in rural and semi-urban markets
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Regulatory and Digital Tailwinds
Recent regulatory changes by the RBI have accelerated gold loan growth:
- Maximum Loan-to-Value (LTV) ratio for loans below ₹2.5 lakh increased from 75% to 85%
- LTV for loans between ₹2.5 lakh and ₹5 lakh raised to 80%
- Loans above ₹5 lakh remain capped at 75%
- Removal of credit appraisal and end-use monitoring requirements for smaller loans
Additionally, digital gold loans are expanding access to new customers, enabling NBFCs to capture untapped market segments more efficiently.
Investor Sentiment Mirrors Industry Growth
The robust performance of gold loan NBFCs is reflected in stock market gains:
- Muthoot Finance: +23% since the start of FY26, closing at ₹2,929
- Manappuram Finance: +25%, closing at ₹232.75
- IIFL Finance: +33%, closing at ₹434.50
Investors remain optimistic about the sustained growth momentum in gold loans, driven by rising gold prices, digital adoption, and regulatory support.
Conclusion: Gold Loans Continue to Shine Amid Tight Credit
The gold loan NBFC sector in India is experiencing remarkable growth, powered by high gold prices, restricted unsecured credit, and favourable regulatory changes. Muthoot Finance, Muthoot FinCorp, and IIFL Finance are leading this rally, reporting strong AUM and disbursement growth.
For customers, gold loans have become a preferred borrowing option, especially for those without extensive credit histories or access to traditional personal loans. Rising gold values enhance the appeal of these loans, making them a reliable source of liquidity.
Regulatory support, including higher LTV ratios and relaxed appraisal requirements, coupled with digitalisation, is further accelerating sector growth. This trend indicates that gold loans will remain a key financial tool for urban and rural borrowers alike.
Investor confidence mirrors these fundamentals, with NBFC shares posting strong gains since April 2025. Overall, gold loan NBFCs are set to continue their upward trajectory, redefining borrowing patterns and capturing new market segments.
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FAQ: Gold Loan NBFC Growth in India
Q1: Why are gold loans in high demand despite other credit options?
High gold prices and tightened credit in unsecured loans and microfinance have made gold loans an attractive borrowing option. Customers, especially those without strong credit histories, use gold as collateral to secure liquidity.
Q2: How has RBI supported gold loan growth?
The RBI raised maximum LTV ratios for loans below ₹5 lakh and removed credit appraisal and end-use monitoring requirements for smaller loans. These measures make it easier for NBFCs to lend against gold, boosting sector growth.
Q3: Which NBFCs are leading the gold loan rally in India?
Key players include Muthoot Finance, Muthoot FinCorp, and IIFL Finance, all reporting strong year-on-year AUM and disbursement growth due to high demand and supportive regulatory conditions.
Q4: How do gold prices influence gold loan demand?
Rising gold prices increase the value of borrowers’ collateral, allowing them to secure higher loan amounts. This has spurred demand for gold loans as customers leverage their assets for liquidity.
Q5: Are digital gold loans contributing to sector growth?
Yes. Digital gold loans enable easier access for customers in rural and semi-urban areas, streamline processes, and reduce turnaround time, expanding market reach for NBFCs.
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