Golden Period

Demand for gold loans will continue to be strong as interest rates weaken and geopolitical tensions lead to an uncertain macroeconomic environment. NBFC giants and new-age firms can build a robust portfolio, say experts

- By SALIL PANCHAL

In an uncertain global macroeconomic environment, the exuberance surrounding gold prices—both international and domestic—is neither puzzling nor worrisome, just distinctive. A range of factors has kept gold prices firm and, though there could be some moderation in returns in the coming months, there is little cause for concern.

Gold prices in India have risen over 51 percent year-on-year to ₹116,790 per 10 grams. International gold prices have also firmed in the first half of 2025, up 26 percent in dollar terms. A weaker US dollar (the US dollar index is down 9.1 percent year-to-date) and an uncertain global economic outlook have raised the investment demand for gold.

The distinctive part is that the demand for gold and rise in prices of the yellow metal have resulted in booming business for several of India's banks, non-banking financial companies (NBFCs) and startups, which offer gold loans. A higher price for gold means a customer who wishes to avail of a gold loan can pledge a smaller amount of gold jewellery and obtain a higher loan amount, depending on the current market value and quality of gold offered as collateral.

Data from the Reserve Bank of India (RBI) reflects the extent to which customers are taking loans against gold. The RBI's September bulletin shows that loan against gold jewellery has risen to ₹2.94 lakh crore (as on July 25), up 122 percent year-on-year. The central bank has been sending a clear signal to banks to lower their exposure to unsecured lending, which includes microfinance loans. Usually a favourite of low-income borrowers, microfinance loans have seen a drop in borrowings and a rise in bad loans.