The gold loan market in India has experienced significant expansion over the past year, with both banks and non-bank financial companies (NBFCs) increasing their lending against gold jewellery. According to recent reports from Reuters, two prominent non-bank lenders, Bajaj Finance and Piramal Finance, have raised concerns about potential stress in this burgeoning segment. Although overdue loans remain at a low level, both institutions have indicated that there are risks that warrant close monitoring as gold-backed borrowing continues to escalate.

Data from the Reserve Bank of India (RBI) reveals that bank loans secured by gold surged by 83 per cent year-on-year, reaching Rs 5.6 trillion in August 2026. Meanwhile, non-bank lenders reported a 69 per cent increase in gold loans, amounting to Rs 3.6 trillion during the same timeframe. The rise in gold-backed lending is attributed to the perception of these loans as being more secure compared to other forms of borrowing.

Despite the rapid growth, concerns have emerged regarding the repayment capabilities of certain borrowers. The increasing reliance on gold loans as a financial resource has prompted lenders to scrutinise the sustainability of this trend.

Bajaj Finance Reports Overdue Loan Concerns

Bajaj Finance, which holds a gold loan portfolio valued at Rs 24,000 crore, has identified a rise in the percentage of loans overdue by more than 30 days in its quarterly results for July to September. The company noted that its overall assets classified under Stage 2 and Stage 3—categories that indicate loans showing signs of stress—have increased by 15 basis points compared to the previous quarter. A considerable portion of this uptick is attributed to short-term gold loans, prompting Bajaj Finance to cease offering these types of loans.

Despite reporting a nearly 30 per cent year-on-year growth in consolidated profit after tax, Bajaj Finance’s shares were observed to be trading 3.2 per cent lower at Rs 926.80 on Wednesday at 12.40 pm, while the benchmark Nifty 50 index fell by 0.6 per cent. Analysts have also pointed out additional risks for Bajaj Finance, including rising inflation, potential regulatory restrictions from the RBI on revolving credit, and new commission rules introduced by the insurance regulator.

Piramal Finance Highlights Emerging Risks

Piramal Finance has similarly expressed concerns regarding the rapid growth of gold-backed lending. During a recent call with analysts, CEO Jairam Sridharan indicated that approximately 35 per cent of the company’s customers also hold a gold loan from another financial institution. He referenced industry data showing that in the fiscal year 2025-26, around Rs 4.7 trillion in gold loan disbursements were made to customers who had other loans overdue by more than 90 days.

While acknowledging these figures, Sridharan clarified that possessing a gold loan does not inherently categorise a borrower as riskier. The complexities surrounding borrowers’ financial situations necessitate a nuanced understanding of the implications of multiple loans. As the gold loan market continues to evolve, both Bajaj Finance and Piramal Finance are likely to remain vigilant in monitoring these emerging trends and risks.

The ongoing developments in the gold loan sector will be crucial in determining the future stability of lending practices in India, as both banks and non-bank lenders navigate the challenges posed by rapid growth and borrower repayment capabilities.

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