Gold loans have emerged as the fastest-growing segment within personal loans, recording a 71% year-on-year (YoY) growth as of December 2024, according to RBI’s sectoral bank credit data. The total gold loan portfolio of banks stood at ₹1.7 lakh crore on December 27, 2024, reflecting a 68.3% rise in the current financial year.
Key Drivers Behind the Surge
Analysts attribute the sharp increase in gold loans to three primary factors:
- Shift from NBFCs to Banks – Regulatory changes have led to a shift in gold loan borrowers from non-banking financial companies (NBFCs) to banks, with banks now holding 82% of the market share, compared to 18% for NBFCs (as of October 2024).
- Rising Gold Prices – Higher gold prices have allowed borrowers to secure larger loans against the same amount of gold.
- Financial Distress – Economic challenges have prompted households to opt for secured gold loans, as unsecured personal loan growth remains sluggish.
Overall Personal Loan Growth Trends
In the broader personal loan category:
- Credit card outstandings rose 15.6% YoY to ₹2.9 lakh crore.
- Home loans remained the largest segment in bank credit, reaching ₹29.3 lakh crore, though their growth slowed to 11.1% YoY.
- Consumer durables loans were the only category to decline, with a 1.1% drop.
Bank Credit Growth Overview
RBI data also showed that:
- Total non-food credit stood at ₹172.5 lakh crore, marking an 11.1% YoY increase.
- Agriculture sector credit grew 12.5% YoY, adding ₹1.67 lakh crore.
- Personal loan segment expanded 12% YoY, adding ₹4.6 lakh crore, making it the biggest contributor to credit growth.
- Industrial sector credit stood at ₹38.5 lakh crore, growing at a slower pace of 7.2%, with large industries recording just 5% growth.
The significant rise in gold loans highlights a shift in borrowing patterns, driven by higher gold valuations and increasing reliance on banks over NBFCs.
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