India’s organised gold loan market is growing at an unprecedented rate. As the country’s reliance on gold-backed credit intensifies, the total market is expected to cross Rs 10 lakh crore in the current fiscal year (FY2025). A report from ICRA projects continued growth for the sector, driven largely by the increasing demand for both agricultural and retail gold loans. The market is on track to reach Rs 15 lakh crore by 2027, fueled by NBFCs and banks offering accessible and quick loans.
NBFCs Lead the Charge in Retail Gold Loans
Non-banking financial companies (NBFCs) have emerged as the frontrunners in India’s retail gold loan market. Known for their streamlined processes, NBFCs offer borrowers faster access to credit against their gold assets. According to ICRA, the retail gold loan market is projected to expand by 17-19% in FY2025, driven by the growth strategies of top NBFC players like Muthoot Finance and Manappuram Finance.
Banks Dominate Agricultural Gold Loans
While NBFCs lead in retail loans, banks continue to dominate the agricultural gold loan sector. Gold-backed loans from banks have been crucial in supporting farmers and rural entrepreneurs, providing much-needed credit for agricultural activities. Banks’ involvement in gold loans has been a cornerstone of rural financial support in India.
Competition Rising in the NBFC Sector
The NBFC gold loan market, however, is witnessing increased competition. While the top four NBFCs control 83% of the market share as of March 2024, their share has declined from 90% in 2022. The entry of newer players and the diversification of existing financial institutions into the gold loan space are intensifying competition and reshaping the market.
Gold Prices and Loan Demand: Key Growth Factors
One of the primary reasons for the sustained demand in the gold loan sector is the steady rise in gold prices. As gold prices increase, borrowers can access higher loan amounts, making gold loans an attractive option for meeting both personal and business needs. Additionally, with the majority of Indian households holding significant gold reserves, gold loans provide a convenient way to leverage this asset for financial gain.
Digital Transformation in the Gold Loan Industry
Another key factor driving the expansion of the gold loan market is the adoption of digital technology. NBFCs and banks have increasingly integrated digital platforms to make loan applications, approvals, and disbursements more efficient. The convenience of online gold loan applications has contributed to the rapid growth of the sector, particularly in urban and semi-urban areas.
Future Growth Projections: Rs 15 Lakh Crore by 2027
Looking ahead, ICRA expects the gold loan market to grow even further, hitting Rs 15 lakh crore by 2027. The combined strength of banks and NBFCs in offering gold-backed loans will continue to meet the financial needs of rural and urban consumers alike. As new players enter the sector and technology plays a larger role, the gold loan market is poised for robust growth over the next few years.
The Indian gold loan market is set for remarkable growth in FY2025, driven by rising demand across both retail and agricultural sectors. While NBFCs are poised to dominate retail gold loans, banks will continue their strong presence in the agricultural space. As competition intensifies and technological advancements reshape the market, the gold loan sector is on track to reach Rs 15 lakh crore by 2027.
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