Industry Odisha Bureau, Sep 07: There’s a strange mismatch at the heart of India’s gold economy. Households sit on roughly 28,000 tonnes of it, worth an estimated Rs 380-390 trillion. Almost none of that wealth has entered the formal credit system. Motilal Oswal’s latest numbers put the figure at just 8% — and that’s using a generous 60% loan-to-value assumption. The rest sits in lockers, bank vaults and family collections, doing nothing for anyone’s balance sheet.
That gap is now the industry’s main growth story. Motilal Oswal projects the gold lending sector will expand at nearly 28% annually through FY28E. The logic isn’t complicated: an asset this liquid and this widely held doesn’t stay outside formal finance forever, especially once banks and NBFCs start competing for it seriously.
They already are. Retail gold loans within the banking system grew 78% annually over the last three years a pace no other consumer credit category came close to matching. Housing loans managed 18%. Vehicle loans and other personal loans sat at 13%. Credit cards, often assumed to be the fastest-growing retail product, trailed at just 10%. Gold quietly became the outlier.
The scoreboard reflects that shift. Gold loans now make up 15.7% of consumption lending across banks and NBFCs. They’ve pushed past personal loans to claim the number-two spot behind housing finance. In rupee terms, FY26 gold-loan books stand at Rs 18.6 billion, ahead of personal loans at Rs 16.5 billion and auto loans at Rs 9.3 billion. Home loans still dominate at Rs 44.4 billion, but the distance is closing from below.
None of this happened overnight. It’s the tail end of a longer move away from India’s traditional gold-lending economy pawnbrokers and local moneylenders operating with little transparency or oversight. Organised lenders held just 26% of the total gold loan market back in FY14. A decade later, that share had climbed to 37%. Slow, but directionally unmistakable.
What’s accelerating that shift now is mostly infrastructure. Digital KYC has cut the friction of lending against an asset that used to require in-person verification and manual appraisal. Regulatory changes have made the process more standardized across lenders. And banks and NBFCs have both been expanding branch networks into areas where gold, not credit history, is the more reliable collateral. Motilal Oswal expects these forces to push organised lenders’ market share up further from here.
The bigger takeaway isn’t really about growth rates. It’s that Indian households have been sitting on a financial asset most of them never thought to formalize treating gold as a store of value rather than as usable collateral. Banks and NBFCs are now making the case that it can be both. Whether that translates into the 28% growth Motilal Oswal is projecting will depend on how far that behavioral shift actually spreads beyond the households already using gold loans today.
