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Gold Loan Sector Surges in India: ₹14.5 Lakh Crore Market Fuels Massive Branch Expansion by NBFCs
- Priya Sharma
- 1 day ago
- 2 min read
India’s gold loan market has witnessed explosive growth, reaching ₹14.5 lakh crore as of September 2025, up 36% year-on-year, according to a report in The Economic Times. Driven by this momentum, non-banking financial companies (NBFCs) are planning one of the largest branch expansion drives in the segment’s history, targeting nearly 3,000 new dedicated gold loan branches over the next 12–18 months.
The surge comes as borrowers, especially those previously reliant on unsecured microfinance loans, shift to gold-backed credit amid stricter lending norms in the microfinance space and persistently high gold prices that enhance loan-to-value ratios.
Key Drivers of Growth
Tightened microfinance lending standards due to rising delinquency concerns
Strong global and domestic gold prices, supported by central bank buying
Shifting perception: gold loans now seen as mainstream, responsible credit rather than “distress financing”
Huge untapped household gold holdings in India
Major Players and Their Expansion Plans
Company | Planned New Branches | Timeline |
Bajaj Finance | 900 | By March 2027 |
IIFL Finance | 500 | By March 2026 |
Muthoot Finance & Muthoot Fincorp | ~600–700 (combined) | FY26–FY27 |
L&T Finance | 200 | By March 2026 |
Poonawalla Fincorp | Reaching 400 total | By March 2026 |
Piramal Finance (newiling entry) | ~100 | First year of operations |
Keertana Finserv | 175 | By FY26 |
Leading NBFCs such as Muthoot Finance, IIFL Finance, and Bajaj Finance alone account for roughly 1,800–2,000 of the projected 3,000 new branches.
Changing Borrower Profile
Industry leaders highlight that the product is no longer associated only with emergencies:
~70% of loans now fund agriculture, small businesses, and working capital needs
Remaining 30% used for planned expenses (weddings, home improvement) or short-term liquidity by salaried individuals
George Alexander Muthoot, MD of Muthoot Finance, noted a clear shift of customers from microfinance institutions to gold loans, particularly among farmers and small traders.
Market Outlook
Rating agency ICRA has upgraded its forecast:
Organised gold loan market expected to cross ₹15 lakh crore in FY26 (a year earlier than previously estimated)
NBFC gold loan AUM likely to grow 30–35% in FY26
Overall sector growth supported by slowing unsecured retail lending and abundant idle household gold
Public sector banks still dominate, especially in agri-gold loans, with their portfolios growing at a 27% CAGR in FY24–FY25, outpacing private banks.
Operational Realities
Opening a gold loan branch is capital-intensive (₹8–20 lakh per outlet) due to mandatory strong rooms, vaults, CCTV, and sensors. However, branches typically achieve break-even within 1.5–2 years. NBFCs with over 1,000 branches require prior RBI approval for new outlets, unlike other non-gold loan NBFCs.
With gold prices remaining elevated and alternative unsecured credit tightening, the gold loan boom shows no signs of slowing, positioning the segment as one of India’s fastest-growing organised lending categories.
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