Kolkata: The price of gold has surged to hitherto unimaginable levels. With the surge in the price of gold, the value of gold loans disbursed in the country in the last financial year also surged. The gold loan market has both players from the organised and unorganised sectors. On the one hand, there are banks, non-banking financial companies and on the other there are numerous entities in the unorganised sector who have dotted the country’s gold loan canvas for decades and more.
The statistics are telling. According to reports, the amount of gold loans that banks have sanctioned in FY25 rose by more than 100% compared to the preceding financial year (FY24). While the cumulative value of gold loans at the end of FY24 stood at Rs 1 lakh crore in F24, it zoomed to about Rs 2.1 lakh crore at the end of FY25. In the process, it surpassed all other categories of retail loans in the country.
Why did gold loans rise so fast
Gold loans rise typically due to a couple of reasons. The first reason can be explored in then LTV or loan to value ratio. Loan to value is a commonly-used metric that tells how much of the value of an asset given as a collateral will be available from a bank. In the case of gold, Reserve Bank of India has set it to 75%. This means the person who is offering the yellow metal as a collateral, can get a maximum loan of 75% of the value of the metal. It is easy to understand that as the market value of the metal rises, the amount available as the loan also rises in tandem. In short, an individual can extract a far bigger loan when the price of gold has risen significantly. The second reason is that a lot of families raise gold loans when facing financial hardships — this has been a typical response for centuries.
Gold loans also powered personal loans
According to reports, gold loans have come to account for 1.1% of total bank credit. In FY24, it had a share of 0.6% — thus the growth in FY25 has been almost double. The other sectors that grew considerably were personal loans that rose by 32.6%, home loans increased by 16.5% but lending to the industrial sector limped in FY25 at 6.2%. By the way, the gold loan surged helped personal loans to grow at the fast clip.
Rates from IBJA (India Bullion and Jewellers Association) show that gold rates on April 1, 2024 and March 31, 2025 stood at Rs 68,860 and Rs 91,910 per 10 gm — a rise of more than 33%. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
