Mumbai: Jewellery-backed loans have emerged as the fastest-growing segment of retail credit for non-banking financial companies (NBFCs), with outstanding gold loans witnessing a sharp rise amid record-high gold prices and increasing consumer demand for secured borrowing. According to the latest data released by RBI, outstanding NBFC loans against gold jewellery increased by 69.9 per cent YoY to Rs 3.29 lakh crore at the end of May 2026, up from Rs 1.94 lakh crore in May 2025.
The rapid expansion significantly outpaced the overall growth in retail loans, which rose by 19.5 per cent during the same period. Over the past two years, the value of gold loans outstanding with NBFCs has climbed by 136 per cent from Rs 1.4 lakh crore, highlighting the growing importance of jewellery-backed lending in India’s retail credit market.
The surge has been driven by a combination of rising gold prices and increasing demand for quick, secured loans. As gold values continue to remain elevated, borrowers are able to unlock greater value from their household jewellery, making gold loans an attractive financing option for both personal and business needs.
Retail loans accounted for 43 per cent of the total loan portfolio of non-banking financial companies as of the end of May, with gold loans contributing 5.6 per cent of all NBFC lending. Loans extended to the industrial sector accounted for 37.4 per cent of total credit, while the services sector represented around 13 per cent.
Industry experts believe the growth in gold loans is also improving financial inclusion by enabling households to monetise assets that would otherwise remain idle. Manish Jain, Country Managing Director of Experian India, said India’s large household gold holdings are helping consumers access formal credit more easily. He noted that the trend allows families to convert traditionally held assets into a reliable source of finance for a variety of personal and livelihood requirements.
The expansion is no longer confined to the traditional strongholds of southern India. According to Experian, several states recorded remarkable sourcing growth during FY26, reflecting wider acceptance of gold-backed lending across the country. Uttar Pradesh led the growth with a 138 per cent increase, followed by West Bengal at 112 per cent, Rajasthan at 105 per cent and Maharashtra at 102 per cent. The trend suggests that gold loans are becoming increasingly popular beyond their historically concentrated regional markets.
Analysts also point out that priority sector gold loans are playing a wider developmental role by supporting women-led households, micro-enterprises and small businesses. By unlocking the value of household gold, such loans are helping generate livelihoods while encouraging greater participation in the formal financial system.
Despite the rapid growth, lenders have not reported any major stress in the segment. However, the widespread practice of rolling over gold loans through partial repayments to extend loan tenures has drawn regulatory attention. In response, the RBI has tightened norms governing such loans.
Under the latest guidelines, borrowers must fully repay bullet repayment gold loans within 12 months. Lenders have also been prohibited from repeatedly extending loan tenures without conducting fresh appraisals, a practice commonly referred to as “evergreening.”
Muthoot Finance, India’s largest gold loan company, reported a gold loan portfolio of Rs 1.65 lakh crore during FY26, backed by approximately 196 tonnes of gold pledged by customers.
The overall gold loan industry, including banks and NBFCs, has also recorded significant expansion. Outstanding gold loans across the sector increased from Rs 6.3 lakh crore in March 2023 to Rs 19.4 lakh crore by March 2026, indicating sustained growth across financial institutions.
Meanwhile, RBI data also highlighted strong growth in commercial real estate lending by NBFCs. Outstanding credit to the sector surged 40.2 per cent YoY to Rs 1.196 lakh crore in May 2026 from Rs 85,317 crore a year earlier, reflecting increased financing for office spaces, warehousing facilities and mixed-use developments. However, banking officials have cautioned that commercial real estate remains a relatively high-risk lending segment alongside unsecured retail loans and microfinance.
Overall, NBFCs, including housing finance companies, continued to expand their lending activities, with total outstanding loans rising 14.2 per cent year-on-year to Rs 58.61 lakh crore in May 2026. Bank credit to NBFCs also grew sharply by 33.7 per cent to around Rs 20.88 lakh crore, strengthening their ability to finance sectors where they possess a competitive advantage, including gold-backed lending and commercial real estate.
