Assets under management (AUM) of non-banking financial companies (NBFCs) specializing in gold loans are projected to achieve a compound annual growth rate (CAGR) of 40% between the current fiscal year and the next, exceeding Rs 4 lakh crore by March 2027, as per a Crisil Ratings report. This growth surge is attributed to high gold prices, a shift towards secured credit, and an improved regulatory environment, outpacing the earlier CAGR of 27% between fiscals 2023 and 2025.
Large gold-loan NBFCs with a strong brand presence are expanding their portfolios in existing branches, while mid-sized players are both enlarging their branch networks and collaborating as originating partners for larger NBFCs and banks, stated Aparna Kirubakaran, Director at Crisil Ratings. These endeavors, coupled with robust demand amid soaring gold prices, have increased business per branch for gold-loan focused NBFCs by 40% over the past two fiscal years.
The average AUM per branch for these NBFCs rose to Rs 14 crore in the initial six months of this fiscal year from Rs 10 crore in fiscal 2024, Kirubakaran highlighted. With gold prices climbing 68% in the first nine months of this fiscal year to record levels, collateral values have surged, enabling lenders to boost disbursements significantly.
Moreover, due to limited credit availability in segments like unsecured lending, borrowers are exploring alternative funding sources. To capitalize on these lending prospects, gold-loan NBFCs are expanding their market presence despite facing tough competition from banks, according to the report.
In terms of regulations, the standardization of loan-to-value (LTV) norms for lower-ticket size gold loans, set to be effective from April 1, 2026, is anticipated to offer additional lending space to NBFCs, the report added. Prashant Mane, Associate Director at Crisil Ratings, noted that there is a shift among borrowers from unsecured to secured credit, driven by asset quality issues in unsecured lending, stringent underwriting practices, and stricter regulatory measures that reduced credit availability through this channel significantly.
Furthermore, gold-loan NBFCs must uphold stringent risk management and operational protocols, including purity assessment, weight measurement, and authenticity verification of the pledged gold.
