India’s gold loan market is expanding rapidly, with rising gold prices, growing formalisation of household borrowing and tighter conditions for unsecured credit pushing more borrowers towards loans backed by jewellery. But as the market attracts banks and new entrants such as Aditya Birla and Tata Capital, the next phase could be less about the size of the opportunity and more about who can capture it profitably.
Gold loans stood at around ₹18.6 trillion, or nearly 11 per cent of retail credit, after growing at a 34 per cent CAGR between FY21 and FY26, according to HDFC Securities. Prices have climbed from roughly ₹47,000-48,000 per 10 grams in 2021 to record levels in 2026. Gold touched an all-time high of around ₹1.78 lakh per 10 grams on January 29, 2026.
The price rally has made gold-backed loans more attractive both to borrowers and lenders. ICRA expects the organised gold loan market to grow at more than 30 per cent CAGR in FY27 and FY28, crossing ₹30 trillion by March 2028, from around ₹18 trillion in March 2026. NBFC gold-loan AUM are projected to grow at around 35 per cent over the same period, compared with 30 per cent for banks.
New players enter a growing market
Large financial groups, including Aditya Birla and Tata Capital, are stepping up their presence in gold lending, adding to competition from established NBFCs and banks. The entry of larger players and their access to relatively cheaper deposits gives them an advantage over NBFCs, which largely rely on market borrowings and other funding sources.
Deven Choksey, MD of DRChoksey FinServ said both cyclical and structural factors are driving the expansion. “Mix of both, FY26 was heavily price-driven. Going forward, structural factors (formalisation of household gold, shift away from unsecured credit, still-low penetration) look more important. Growth will moderate but should remain healthy.”
He also pointed to a major shift in borrowing behaviour, saying, “it is actively substituting.” According to Choksey, gold loans’ share of retail disbursements rose to around 41 per cent in FY26 from roughly 18-20 per cent earlier, as borrowers looked for cheaper and faster credit while lenders favoured secured lending.
But can the rally continue?
The key question for investors is whether gold-loan growth can continue at the pace seen over the past five years. Choksey believes the answer is no, at least not at the same rate.
G Chokkalingam, founder of Equinomics Research, cautioned that the industry’s strongest growth phase may be behind it. “According to me, it is a peak of the cycle in gold loans,” he said, adding that the opportunity will continue to expand but “it is not likely to grow how it grew in the last five years and it is not likely to give profit margin how it gave in the last five years.”
For investors, the likely winners may therefore be companies that can grow while protecting margins and funding costs. Choksey ranks Muthoot Finance first on earnings leverage, followed by IIFL Finance and Manappuram Finance. He sees Muthoot as having the strongest structural leverage, IIFL as a turnaround and mix-shift play, and Manappuram as having the highest volume leverage.
Chokalingam similarly expects the industry to favour lenders with cheap funding, strong brands, efficient branches and better asset quality. “The companies which have access to cheap credit, cheap financial resources, strong brand image, good network of branches will matter, and they will grow faster than the industry.”
Sunny Agrawal, head of fundamental research at SBI Securities, said that the rising competition from existing players, large diversified lenders (Chola, Bajaj Finance, Shriram Finance), and new entrants (Tata Capital, AB Cap) in the gold loan segment would result in margin pressure. New entrants might also offer higher LTV loans to attract customers. “We have witnessed Muthoot Finance reporting considerable margin pressure in Q1 due to the above-mentioned factors. We remain cautious in the gold lending segment,” he said.
Analysts, however, still prefer Muthoot Finance as their top pick in the gold-loan space. Choksey sees Muthoot as having the strongest structural leverage, meanwhile, Agarwal also prefers Muthoot for its wide geographical reach.