Gold loan boom: Credit market poised for major expansion; NBFCs plan 3,000 new branches as demand jumps
India’s gold loan market is gearing up for strong expansion, with non-bank lenders preparing to open around 3,000 dedicated branches over the next year to meet rising demand. The market, which is largely led by public-sector banks, grew 36% year-on-year to Rs 14.5 lakh crore by the end of September.According to sector heads quoted by ET, this is the largest annual branch expansion undertaken by gold loan companies. Lenders are setting up exclusive gold-loan centres and adding the product to many existing branches to tap what they see as a fast-growing opportunity.George Alexander Muthoot, managing director of Muthoot Finance, was cited by ET as saying that demand for gold loans is increasing sharply, as borrowers struggling to secure unsecured microfinance loans are turning to secured lending against jewellery. Microfinance firms have become more selective due to heavy stress in their asset quality.Rising gold prices have also boosted loan ticket sizes, making the product particularly attractive to farmers and small traders seeking working capital. Rating agency ICRA has projected the organised market will reach Rs 15 lakh crore in FY26, a year ahead of earlier expectations.Shaji Varghese, CEO of Muthoot Fincorp, said that he expects the momentum to continue, noting that global central bank demand is driving gold prices, reported ET. His firm plans to open 200 branches by March. Major players such as Muthoot Finance, Muthoot Fincorp, IIFL Finance and Bajaj Finance together intend to add about 1,800 branches. Bajaj Finance alone aims to open 900 by March 2027, while IIFL Finance plans 500 by this fiscal year.New entrants are also expanding aggressively. L&T Finance, which entered the gold loan market in February after acquiring Paul Merchants Finance’s 130-branch business, plans to add 200 more outlets. Microfinance players such as Keertana Finserv and Uttrayan Financial Services are diversifying into gold loans to stabilise their portfolios. “We are scaling down our microfinance business,” Padmaja Reddy said, adding they will set up 175 gold-loan branches by FY26, ET reported.Setting up a gold loan branch requires significant security infrastructure, from strong rooms to vaults and cameras, costing between Rs 8 lakh and Rs 20 lakh. Such branches usually break even within 1.5–2 years.ICRA expects NBFC gold-loan assets under management to grow 30–35% in FY26, supported by high gold prices and slower growth in unsecured loan products. Public-sector banks remain dominant in the segment, with their gold loan portfolios growing at a CAGR of 27% in FY24 and FY25, compared with 22% for private banks.
