India's gold loan market is showing early signs of stress as non-banking financial companies (NBFCs) flag emerging repayment risks amid a sharp rise in gold-backed borrowing. While overdue loans remain relatively low, concerns are growing about borrowers' repayment capacity as lenders expand their portfolios.
According to Reserve Bank of India (RBI) data, bank loans against gold rose 83% year-on-year to ₹5.6 trillion in August 2026. Gold loans from non-bank lenders increased 69% to ₹3.6 trillion during the same period.
Banks and NBFCs have expanded gold-backed lending because the loans are secured by borrowers' gold holdings. However, rapid growth has prompted lenders to monitor potential weaknesses in repayment behaviour.
Bajaj Finance Flags Rising Gold Loan Overdues
Bajaj Finance, which has a gold loan portfolio worth ₹24,000 crore, reported an increase in the share of loans overdue by more than 30 days in its July-September quarterly results.
The lender also reported a 15-basis-point quarterly increase in assets classified under Stage 2 and Stage 3, categories that indicate varying degrees of credit stress.
Bajaj Finance said short-term gold loans accounted for a significant portion of the increase. The company has since stopped offering these loans.
Despite the emerging concerns, the lender reported an almost 30% year-on-year increase in consolidated profit after tax. Its shares, however, traded 3.2% lower at ₹926.80 on Wednesday at 12:40 pm, while the benchmark Nifty 50 index declined 0.6%.
Brokerages also highlighted other potential risks facing the company, including rising inflation, possible RBI restrictions on revolving credit and tighter commission rules introduced by the insurance regulator.
Piramal Finance Highlights Borrower Risks
Piramal Finance has also raised concerns about developments in the gold-backed lending market.
Chief executive Jairam Sridharan told analysts that nearly 35% of the company's customers also held a gold loan from another financial institution.
He further cited industry data showing that approximately ₹4.7 trillion in gold loan disbursements during 2025-26 went to customers who had other loans overdue by more than 90 days.
However, Sridharan cautioned that having a gold loan does not automatically make a borrower riskier.
What the Gold Loan Trend Means for Lenders
The rapid expansion of gold-backed borrowing is increasing the importance of monitoring repayment patterns, borrower indebtedness and lending standards.
Although the reported stress signals have not established a widespread deterioration in gold loan quality, the developments highlight risks that lenders may need to manage as portfolios grow.
Future trends in overdue payments and lenders' credit assessments will be important indicators of whether the current warning signs develop into broader problems for India's gold loan market.
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