The Indian lending landscape underwent a historic shift in 2025, as gold loans emerged as the country’s fastest-growing credit category. While overall bank credit grew at a steady 14.5%, loans against gold jewellery skyrocketed by an unprecedented 125.3% year-on-year as of December 2025.
This “Gold Rush” has propelled the organized gold loan market toward a projected ₹15 lakh crore milestone by March 2026—achieving this target an entire year ahead of industry forecasts.
1. The Trio of Growth: Why Gold Loans Exploded
The 125% surge wasn’t a fluke; it was the result of a “perfect storm” of three major economic catalysts:
- Record-High Gold Prices: As domestic gold prices touched ₹1.32 lakh per 10 grams during 2025 rallies, the collateral value of household jewellery increased. This allowed borrowers to unlock significantly higher loan amounts without pledging additional gold.
- RBI’s “85% LTV” Boost: In a landmark move to assist small borrowers, the Reserve Bank of India (RBI) raised the Loan-to-Value (LTV) ratio to 85% for small-ticket loans (up to ₹2.5 lakh). This drastically increased the “cash-in-hand” for rural and middle-class families.
- The Unsecured Credit Crunch: As banks tightened their belts on credit cards and personal loans due to rising default risks, borrowers pivoted to the speed and lower interest rates of secured gold loans.
2. Market Share: Banks vs. NBFCs
The 2025 surge saw a fascinating battle for dominance between traditional Public Sector Undertaking (PSU) banks and specialized Non-Banking Financial Companies (NBFCs).
| Lender Type | Market Share (Portfolio) | Dominant Strategy |
| PSU Banks | ~60% | Focusing on high-value, large-ticket loans at lower costs. |
| NBFCs | ~8.1% (by value) | Dominating high-volume, small-ticket loans (16.6% share of accounts). |
| Private Banks | Gradual Decline | Squeezed between the scale of PSUs and the speed of NBFCs. |
Key Insight: While banks hold the most money, NBFCs like Muthoot and Manappuram continue to lead in rural penetration and “doorstep” digital gold loan services.
3. New RBI Rules: From “Dazzle to Discipline”
To manage the risks of this 125% expansion, the RBI implemented several “safety-first” regulations in mid-2025:
- Income Proof: Lenders must now verify a borrower’s repayment capacity, ending the era of purely “collateral-only” lending.
- Transparency Penalties: Lenders must return pledged gold within 7 working days of loan closure. Failure to do so attracts a penalty of ₹5,000 per day payable to the borrower.
- Purity Standards: Gold must be benchmarked to 22 carats, and lenders must provide a certificate detailing gross and net weight to the borrower during the valuation.
4. The Geographic Powerhouse: South India Leads
The gold loan boom remains highly concentrated in certain regions, though new markets are emerging rapidly.
- The South Dominates: Over three-fourths of the total portfolio is held in Southern states, with Tamil Nadu alone accounting for nearly one-third of India’s gold loan value.
- The Rising Star: Gujarat emerged as the fastest-growing major state in 2025, recording a staggering 67% year-on-year growth in gold-backed credit.
Conclusion: A Structural Shift in Indian Credit
The 125% surge in 2025 signals that gold has transitioned from “idle wealth” to a dynamic financial tool for the masses. With the organized market on track to hit ₹18 lakh crore by FY2027, the “yellow metal” is no longer just for special occasions—it is the backbone of India’s retail credit recovery. However, the real test will come if gold prices stabilize or dip, putting the new 85% LTV buffers to their first true stress test.
