By India’s gold loan market is set for rapid growth, with the organised sector expected to exceed Rs 10 lakh crore by FY2025, according to a report by ICRA. The retail gold loan segment is witnessing strong growth, led by non-banking financial companies (NBFCs), while banks continue to dominate the agricultural loan sector. With rising competition and increasing demand for gold-backed credit, the total market is projected to reach Rs 15 lakh crore by 2027.
Retail Gold Loans: NBFCs at the Forefront
NBFCs are expected to be the primary drivers of growth in the retail gold loan segment, with projected growth rates of 17-19% for FY2025. The appeal of NBFCs lies in their ability to provide quick disbursement, minimal paperwork, and flexible loan options. As of March 2024, the top four NBFCs control 83% of the retail market, though competition is increasing as new players enter the sector.
Agricultural Gold Loans: Banks Hold Strong
While NBFCs are taking the lead in the retail segment, banks maintain a stronghold in agricultural gold loans. These loans, backed by gold jewellery, provide vital support to rural communities and farmers who rely on timely credit for agricultural activities. Banks’ extensive rural reach ensures their continued dominance in this segment, catering to India’s agrarian economy.
Emerging Competition in the NBFC Sector
The NBFC market, although dominated by a few major players, is seeing growing competition. The market share of the top four NBFCs, which stood at 90% two years ago, has now decreased to 83% due to the entry of new competitors. This increased competition is driving innovation in loan products and services, as well as investments in digital platforms to improve customer experiences.
Factors Behind the Growth of Gold Loans
Gold loans are becoming an increasingly popular financial product for several reasons. The rising price of gold allows borrowers to secure higher loan amounts, while the quick approval process and minimal documentation requirements make them convenient. Additionally, the widespread availability of gold jewellery as collateral makes these loans accessible to a large part of the population.
Gold Price Volatility and Its Impact on the Market
Gold price fluctuations have a direct impact on the gold loan market. As prices rise, borrowers can access larger loans against their gold assets. However, lenders must manage the risks associated with gold price volatility, balancing loan amounts with collateral values to avoid potential losses in case of price drops.
Future Projections: Rs 15 Lakh Crore by 2027
The Indian gold loan market is expected to continue its upward trajectory, reaching Rs 15 lakh crore by March 2027. This growth will be driven by increasing demand for both retail and agricultural gold loans, alongside technological advancements that streamline the loan application and approval processes. As competition intensifies, both NBFCs and banks are likely to introduce new products and services to capture a larger share of this lucrative market.
The gold loan market in India is set for significant growth, with the organised sector expected to exceed Rs 10 lakh crore by FY2025 and reach Rs 15 lakh crore by 2027. NBFCs will lead the retail segment’s growth, while banks will continue to dominate the agricultural sector. As competition intensifies, innovation and technology will play key roles in shaping the future of India’s gold loan industry, ensuring its ongoing expansion.
