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Gold loan boom raises early signs of borrower stress at NBFCs

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Gold loan boom raises early signs of borrower stress at NBFCs

Shriram Finance has reported an increase in loans overdue by more than 90 days, while Bajaj Finance has seen a rise in Stage 2 assets linked to short-tenure gold loan schemes. Muthoot Finance has also recorded a sharp increase in Stage 2 and Stage 3 assets, which it attributes largely to changes in repayment structures.

Bank gold loans rose 83% year on year to Rs 5.6 lakh crore in August, while NBFC gold loans grew 69% to Rs 3.6 lakh crore. Piramal Finance estimates that Rs 4.7 lakh crore of gold loan disbursements in FY26 went to borrowers who were already overdue on other loans. Shriram Finance’s gold loan Stage 3 ratio rose to 3.12% in September from 2.28% a year earlier. Rising gold prices have strengthened collateral buffers, but a sustained correction could expose lenders to higher losses, particularly where loan-to-value ratios are elevated.

India’s rapidly expanding gold loan market is showing early signs of borrower stress , with rising delinquencies at some large non-banking financial companies (NBFCs) and concerns that customers are pledging jewellery to repay overdue loans from other lenders. The trend is raising questions about the sustainability of growth in a segment that has become an important source of secured credit for households and small businesses Shriram Finance has reported an increase in loans overdue by more than 90 days, while Bajaj Finance has seen a rise in Stage 2 assets linked to short-tenure gold loan schemes. Muthoot Finance has also recorded a sharp increase in Stage 2 and Stage 3 assets, which it attributes largely to changes in repayment structures.


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