How A Price Surge Fuelled Gold Loans Sparked Talk Of Behavioural Change

The unprecedented rise in gold prices over the last one year – albeit one that has cooled in recent months – has led to such an increase in loans against the yellow metal that experts think Indians are now willing to pawn what they hold of it more easily than before even as prices have moderated. Over the last few years, the people taking gold loans have been increasingly more creditworthy, with Simranjeet Singh, Chief Executive Officer of the SME and retail verticals at Anand Rathi Global Finance, saying that prime and above-prime borrowers’ participation has risen from 43% to 52%. This, according to Singh, suggests “a structural shift in that borrowers now consider gold loans as a major financial tool rather than an emergency last resort option.” What are gold loans being used for? Experts note financing business growth, travel, and even higher education, while the Reserve Bank of India noted last week in its Financial Stability Report that existing borrowers have used higher gold prices to secure larger loans and roll over their debt. The growth in gold loans has indeed been extraordinary. According to new data from the RBI on Tuesday, loans given by non-banks against gold jewellery were up a massive 70% year-on-year as at the end of May — the segment with by far the highest growth. From 3% in May 2024, loans against gold jewellery now make up almost 6% of non-banks’ loans and amount to Rs 3.3 lakh crore. For banks, gold loan growth is an even more extraordinary 105%, with total gold loans standing at Rs 5.1 lakh crore as at the end of May. And while non-banks saw the share of gold loans almost double in two years, for banks the increase has been almost 4x: from 0.64% in May 2024 to 2.4% in May this year. Gold-backed credit To put these gold loan growth numbers in context, non-banks’ total loans were up 14% year-on-year as at the end of May, while credit growth for banks was 18%. In its Financial Stability Report, the RBI also noted that the rapid growth in gold loans has coincided with a decline in the increase in outstanding personal loans for borrowers who have both personal loans and gold loans. “This trend is particularly pronounced among sub-prime borrowers, whose outstanding personal loan balances and loan accounts have declined,” the central bank said. According to TransUnion CIBIL, the share of gold loans in banks and non-banks’ total loans had increased to 11.1% in December 2025, second only to housing loans, from 5.9% in March 2022. And this was before the January 2026 price surge that saw global gold prices hit all-time highs of around $5,500 per ounce. But what happens now that gold prices are closer to $4,000/oz? For the RBI, elevated price volatility “merits continued vigilance”. “A prolonged correction in gold prices could weaken collateral protection, increase borrower stress, and result in higher delinquencies,” the central bank said. An analyst tracking gold at a domestic brokerage said the precious metal “is not just for hoarding for a rainy day” anymore but is also “a good option for leveraging in a society where wage growth has been sluggish”. With gold loans becoming more and more popular, it could lead to a behavioural change. The public’s increased willingness to borrow against their gold also hits a sweet spot for lenders, with Singh of Anand Rathi pointing out that the preference for secured lending by financial institutions indicates that “the rise in the gold loan segment is here to stay and is not just a cyclical spike”. The rate of expansion may moderate, but in the long-term, Singh said, the segment is set to grow even more.