New Delhi, Jan 22 (UNI) The Assets Under Management (AUM) of non-banking financial companies (NBFCs) focused on gold loans are projected to cross Rs 4 lakh crore by March 2027, driven by high gold prices, rising demand for secured credit, and regulatory streamlining, according to Crisil Ratings.
The surge will be driven by elevated gold prices, a shift towards secured credit, and an evolved regulatory environment, outpacing the CAGR of 27 per cent clocked between fiscals 2023 and 2025.
Gold prices soared by 68 per cent in the first nine months of this fiscal year to an all-time high. This has enhanced collateral values, enabling lenders to scale up disbursements.
Furthermore, amid the limited availability of credit from segments such as unsecured lending, borrowers are looking for other sources of funding.
To capitalise on these lending opportunities, gold-loan NBFCs (both large and mid-size ones) have been expanding their market presence, despite stiff competition from Banks.
On the regulatory front, streamlining of loan-to-value (LTV) norms for lower-ticket size gold loans, applicable from April 1, 2026, is expected to provide additional headroom to NBFCs for lending.
In an earlier press release dated June 13, 2025, Crisil had highlighted the potential benefits of permitting higher LTV of 85 per cent and 80 per cent (vs 75 per cent earlier) for bullet repayment loans with ticket size of less than Rs 2.5 lakh (comprising 50 per cent of AUM) and Rs 2.5 – Rs 5 lakh (20 per cent of AUM) respectively.
Our analysis indicates the LTV for lower-ticket size bullet loans could potentially increase from 65-68 per cent currently to 70- 75 pc following the implementation of the revised LTV norms, even after factoring in the accrued interest as per revised LTV computation guidelines.
The combined effect of elevated gold prices and revised LTV norms will enable borrowers to avail of more credit against the same quantity of gold, thereby increasing the attractiveness of gold loans.
While the growth trajectory remains buoyant, effective management of inherent risks will be key to supporting sustainable scaling up. A surge in demand and disbursements at higher LTVs will ultimately lead to a lower cushion to manage gold price fluctuations, Crisil said.
Therefore, keeping track of LTVs on a mark-to-market basis and maintaining discipline on auctions will be the key, especially in the case of any sharp fall in gold prices.
Furthermore, gold-loan NBFCs will need to maintain strict control on risk management and operational procedures, including purity assessment, weightage measurement, and authenticity evaluation of the pledged gold.
Additionally, periodic internal audits at the branch level will be essential to prevent surprises at the auction stage. A crucial aspect of the growth story of gold-loan NBFCs is managing competition.
Over the years, these NBFCs have carved out a niche by strengthening internal policies, improving underwriting capabilities, and expanding to both prime and non-prime locations.
With banks also intensifying their presence in the gold loan space, the ability of gold-loan NBFCs to sustain growth momentum while managing competition will be something to watch out for.
