Gold has always lived quietly in Indian households, tucked into velvet boxes, passed through generations as a symbol of love and affection and as a legacy, trusted more than paper wealth. Yet for decades, unlocking its financial value meant visiting a branch, standing in queues, filling out physical forms, and negotiating terms across a counter.

Gold loans were dependable, but the process was traditional. Today, the story is changing. India’s emotional attachment to gold remains unchanged, but the way that gold powers financial inclusion is evolving rapidly, from physical pledging to digital empowerment. The future of the gold loan industry in India is not just secured by gold itself but by the strength of its digital backbone.

Gold loans are the secured short-term credit facilities offered by banks and other financial institutions in the regulated environment and local money lenders in the unregulated space. The Indian Gold loan market is expected to reach $157.60 billion by the end of 2031, with a CAGR of 11.90 percent (TechSci Research, 2025).

The Indian gold loan market has witnessed enormous changes in lending procedures and policies due to rising competition and the number of lenders, resulting in more attractive interest rates and improved loan terms favouring borrowers. This has led to a surge in Gold loan demand; hence, lenders are now under pressure to attract new borrowers and retain existing ones. India stands as one of the world's largest gold markets, with households holding over 25,000 metric tonnes of gold, amounting to INR 126 lac crores. However, only INR 7.1 trillion has been tapped by the organised sector in the form of Gold loans, limiting the market penetration to 5.6 percent (PwC, 2024). This disparity between available gold assets and active loan penetration underscores a vast growth opportunity for formal lenders.

India is the world’s leading consumer of gold in 2024. The primary driver of the demand is from the sale of jewellery. The overall demand for India in 2024 was 563.4 tonnes. The fact that annual demand only shrank by 2 percent during a year in which the gold price reached multiple record highs is a testament to the resilience of gold jewellery demand in India and the affinity of Indian toward gold. Figure 1 shows the rising demand for buying gold during 2023 and 2024.

According to the Reserve Bank of India, the Indian digital lending ecosystem has two main categories, i.e. the Formal sector, i.e. banks or NBFCs and the informal sector. The formal sector is evolving by engaging in WhatsApp banking, mobile banking, app-based business generation and collaborating with fintech companies. The gold loan sector is embarking on a new journey under digitisation, and NBFCs are the frontrunners in this school of thought.

The gold loan lending scenario in leading Public Sector Banks and NBFCs in the recent past

In recent reports, it is reported that the Indian gold loan sector has yielded 122 percent of year-on-year growth, reflecting the healthy competition in the gold loan sector in the country. From Figures 2 and 3, it is very clear that among the selected banks under the study, Canara Bank and SBI are leading the pack in the gold loan business with INR 1.81 lac crores and 1.74 lac crores, respectively, as of March 2025. The same leaders can also be found on the front line during the previous two financial years, 2023 and 2024.

Out of the two leading NBFCs in the country, i.e., Muthoot Finance Limited and Manappuram Finance Limited, Muthoot is exhibiting a consistent increase in the gold loan business with 41 percent YOY growth, with 1.02 lac crores of gold loan assets under management as compared to INR 24700 crores of business of Manappuram Finance Limited with a 19 percent growth rate as on 31st March 2025.

Share of agri and non-agri gold loan of Public Sector Banks

It is noteworthy to mention that among the selected peer banks under consideration, most banks having more than 70 percent of the business lent under gold loans fall under the agriculture sector during FY 2023-24. In the case of Canara Bank, 99 percent of the bank’s gold loan business is under agriculture during the same period.

As shown in Figure 4, in FY 2024-25, even though the agriculture sector holds the main stage, we can still observe changes in the business reach, i.e. in almost all the selected banks, gold loan lending to non-agri has increased from 1 to 29 percent in FY 2024 to 11 to 34 percent in FY 2025.

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