Gold loan market set to grow faster than expected, to reach Rs 15 trillion in FY26: Report

India's organised gold loan market is projected to reach Rs 15 trillion (Rs 15 lakh crore) in the current financial year (FY26), according to a report released on Wednesday. This milestone comes a year ahead of earlier projections, it added.

The market is expected to grow to Rs 18 trillion (Rs 18 lakh crore) by FY27 on the back of rising gold prices, a report by credit rating agency ICRA said.

A slowdown in the growth of unsecured loans also contributed to the increase in gold-loan assets managed by NBFCs, said A.M. Karthik, senior vice president and co-group head, financial sector ratings, ICRA Ltd.

Add Zee Business as a Preferred Source

He said the report estimates NBFC gold loan assets under management (AUM) to grow by 30-35 per cent in FY2026, driven by diversification by players in the sector and also by large estimated free gold holdings in the country.

The report said gold loans are projected to grow at a compound annual growth rate (CAGR) of around 26 per cent during FY2024-FY2025 to reach Rs 11.8 trillion by March 2025, with banks showing a slightly higher expansion rate than NBFCs.

ICRA said banks remain the dominant players with 82 per cent market share in total gold loans, while the remaining share is held by NBFCs.

The increase in overall gold loans was mainly due to agriculture and other loans secured by gold jewellery, which were given by banks. However, the rating agency said this segmental growth is expected to moderate significantly in FY2025, as banks have imposed stricter eligibility criteria and reclassified some of these loans under the retail or personal category.

"NBFCs focused on gold loans maintain their robust lending spread, supported by improving operational efficiencies and moderate credit losses, which sustain their net earnings. Nevertheless, competitive intensity is steadily increasing from new entrants and the ongoing expansion of banks in this segment, resulting in potential yield pressures for market participants," Karthik explained.

As a result, it will be important for these companies to continuously enhance operational efficiency to build adequate buffers against such yield pressures, he said.

With IANS Inputs