Gold Loans Surge in India as Rising Prices Help Households Unlock Stored Wealth

Gold loans are witnessing rapid growth in India as borrowers increasingly choose to pledge jewellery to meet funding requirements rather than sell it. Recent data shows that the trend accelerated in 2026, with both NBFCs and banks recording strong growth in credit against gold jewellery.

Credit against jewellery by NBFCs, including housing finance companies, increased 68.5% year-on-year in July 2026, compared with 43.9% in the previous year. Bank credit against gold jewellery also rose 88.1% year-on-year.

At the end of July, outstanding gold-backed credit stood at around Rs. 3.54 lakh crore for NBFCs and Rs. 5.52 lakh crore for banks. Gold loans were also among the fastest-growing retail loan categories for NBFCs during the month.

One of the major factors behind the surge has been the sharp increase in gold prices. Domestic gold prices remained significantly higher in 2026 compared with the previous year. During Q2 2026, India’s domestic gold price rose 59% compared with the previous year, despite easing from earlier peaks. The increase played an important role in boosting demand for gold loans.

The amount that can be borrowed against gold jewellery depends partly on the value of the gold and the applicable loan-to-value (LTV) limit. As gold prices rise, borrowers can obtain a higher loan amount against the same quantity of gold.

For Indian families, the option to retain ownership of jewellery is another important factor. Gold often carries both financial and emotional value, and selling it provides cash immediately but permanently parts the owner from the asset. Under a gold loan, the jewellery is pledged as collateral with the lender. Once the loan is repaid, the collateral is released and returned to the borrower.

This can make gold loans an option for short-term funding requirements such as medical emergencies, education, business needs or other large expenditures.

The trend has become particularly notable as gold recycling has reduced despite being 60% higher year-on-year. Gold holders are increasingly choosing collateralised borrowing to monetise their holdings instead of selling gold for cash.

The secured nature of gold loans is another factor behind their growth. A gold loan is backed by physical gold pledged with the lender, unlike a personal loan where there is no asset involved.

The collateral provides lenders with additional security against potential repayment concerns and allows borrowers to access credit using an asset they already own. This can be particularly useful for individuals who do not have a strong credit history or who find unsecured borrowing expensive.

Gold lending was previously an important business for specialised NBFCs, but banks have increasingly expanded their presence in the segment. Bank lending against gold jewellery has grown rapidly, with outstanding credit reaching approximately Rs. 5.52 lakh crore by July 2026.

Earlier, at the end of May 2026, outstanding gold loans stood at around Rs. 5.1 lakh crore for banks, reflecting 105% year-on-year growth.

The rise in gold loans is also taking place amid broader changes in India’s retail credit market. The RBI has introduced certain measures in recent years to strengthen risk management around unsecured consumer credit. As lenders focus on risks associated with unsecured borrowing, secured products can become an important part of lending strategies.

This does not mean that consumers have stopped using online loans or other forms of unsecured credit. However, the growth in gold loans indicates that both lenders and borrowers are increasingly using existing assets to access funds.

The rapid expansion of gold-backed lending has also been accompanied by a stronger regulatory framework. The RBI’s Lending Against Gold and Silver Collateral Directions, 2025 introduced standardised requirements covering areas including valuation, assaying, LTV limits and the release of pledged collateral.

For consumption loans, the framework permits a maximum LTV ratio of 85% for loans up to Rs. 2.5 lakh, up from the long-standing 75% cap. The maximum LTV ratio is 80% for loans above Rs. 2.5 lakh and up to Rs. 5 lakh, and 75% for loans above Rs. 5 lakh.

These requirements are intended to bring greater consistency and transparency to gold-backed lending. For smaller borrowers and households in semi-urban and rural India, this provides a direct lift in credit accessibility.

The rapid rise in gold loans reflects a changing role for gold in Indian households. The precious metal is no longer only an asset purchased, stored and passed on through generations. It is also increasingly being used as collateral to access formal credit.

With NBFC gold-backed lending rising 68.5% year-on-year in July 2026 and bank lending against gold jewellery also expanding rapidly, gold loans have assumed greater importance in India’s retail credit market.

The underlying shift is straightforward: when cash is required, households can pledge gold as collateral to unlock liquidity while retaining the possibility of getting their jewellery back after repayment.