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Muthoot Finance Boosts FY26 Gold Loan Growth Outlook to 30-35%
- Priya Sharma
- Dec 24
- 3 min read
Muthoot Finance, India's leading non-banking financial company (NBFC) specializing in gold loans, has raised its growth expectations for the fiscal year 2026 (FY26). The company now anticipates a 30-35% increase in its gold loan assets under management (AUM), up from the earlier projection of 21%. This upward revision reflects strong momentum in the gold loan segment amid rising demand and supportive regulatory changes.
The announcement comes on the back of robust financial performance in the second quarter of FY26. Muthoot Finance reported a significant surge in its business, driven by favorable market conditions and evolving customer preferences for secured lending options.
Strong Q2FY26 Performance Drives Optimism
In the quarter ended September 2025, Muthoot Finance's consolidated loan AUM grew by 42% year-on-year to reach ₹1.47 trillion. The gold loan portfolio, which forms the core of its operations, expanded even faster by 45% to ₹1.24 trillion. This growth highlights the resilience and appeal of gold-backed loans in a volatile economic environment.
The company's managing director, George Alexander Muthoot, attributed this performance to improving customer demand and the segment's consistent outperformance. “The gold loan segment continues to outperform, supported by improving customer demand,” he stated. High gold prices have also played a key role, enabling borrowers to access larger loan amounts against their pledged gold.
Key Factors Behind the Upward Revision
Several factors have contributed to the revised guidance. First, customer demand for gold loans remains robust across rural and urban areas. Unlike unsecured credit, gold loans offer lower interest rates and quicker disbursement, making them attractive amid tighter lending norms in other segments.
Second, regulatory changes are expected to provide a further boost. The Reserve Bank of India (RBI) has introduced easier guidelines for gold loans, particularly for small-ticket loans below ₹2.5 lakh. These changes simplify compliance requirements, making it more convenient for borrowers to access such loans. George Alexander Muthoot noted that these reforms would enhance accessibility for smaller borrowers.
Additionally, the overall gold loan market in India is expanding rapidly. Scheduled banks currently hold a portfolio worth ₹13 trillion in gold loans, while NBFCs manage ₹3 trillion. This disparity indicates substantial room for growth, with both banks and NBFCs benefiting from rising demand.
Broader Market Context and Competitive Landscape
The gold loan industry has seen increased participation from banks and other financial institutions in recent years. Factors such as rising gold prices, tighter norms for unsecured loans, and economic uncertainties have driven more borrowers toward collateralized credit. Muthoot Finance's dominant position in the NBFC space, with a vast network of branches and a strong brand, positions it well to capture market share.
While competition from banks is intensifying, the managing director emphasized that the market is large enough for all players. “There is enough space for everyone to grow,” he said, highlighting that only a fraction of India's household gold is currently pledged for loans.
Challenges in Microfinance and Diversification Efforts
Despite the strong gold loan performance, Muthoot Finance's microfinance subsidiary, Belstar, has faced headwinds. The loan book contracted from ₹10,500 crore to ₹7,000 crore due to consolidation efforts amid industry-wide stress in microfinance. Collections have stabilized, but the sector is expected to remain challenging in FY26, with recovery anticipated in FY27.
The company is actively diversifying through subsidiaries like Muthoot Money, which has shifted focus to gold loans, and by expanding branch networks. These efforts aim to balance growth and risk.
Outlook and Implications for the Industry
The upward revision in growth guidance underscores Muthoot Finance's confidence in sustained momentum. With gold prices remaining elevated and regulatory support in place, the company is well-positioned for a strong second half of FY26.
This development reflects broader trends in India's financial sector, where gold loans continue to serve as a reliable source of credit for millions. As NBFCs like Muthoot Finance adapt to regulatory changes and market dynamics, the industry is likely to see continued expansion.
Analysts view this as positive for the stock, though valuations remain elevated. Investors will watch closely for the company's ability to maintain asset quality and profitability amid competitive pressures.
In summary, Muthoot Finance's decision to raise its FY26 gold loan growth target to 30-35% highlights the sector's strength and the company's strategic advantages. With a solid foundation in gold loans and proactive diversification, it remains a key player in India's evolving credit landscape.
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