Organised Gold Loan Market Set to Surpass Rs 10 Trillion by FY25, May Reach Rs 15 Trillion by 2027

Organised Gold Loan Market Set to Surpass Rs 10 Trillion by FY25, May Reach Rs 15 Trillion by 2027

The organised gold loan market, comprising loans offered by banks and non-banking finance companies (NBFCs), is on track to exceed Rs 10 trillion in the current financial year (FY25) and could potentially reach Rs 15 trillion by March 2027, according to projections from a leading rating agency.

Between FY20 and FY24, the gold loan segment experienced robust growth, expanding at a compound annual growth rate (CAGR) of 25%. Banks witnessed a 26% growth in their gold loan portfolios, largely driven by agriculture loans backed by gold jewellery, while NBFCs grew their portfolios by 18%. NBFCs remain dominant in the retail gold loan space.

The agency also noted a moderation in competitive intensity, leading to a slight expansion in loan yields for NBFCs, although these yields are expected to be 200-300 basis points lower than the peak levels recorded 4-5 years ago.

Looking ahead, the gold loan portfolios of NBFCs are forecasted to grow by 17-19% in FY25, with a CAGR of 14-15% expected over FY26-FY27. Strong gold prices and the slower growth of unsecured loans are expected to drive this expansion, continuing the momentum seen in FY24.

NBFCs' gold loan portfolios are primarily held by a few major players, with the top four companies accounting for 83% of the market share in March 2024, a slight decline from 90% two years earlier.