From emergency credit to smart liquidity tool: how Indian households are reformulating gold loans

For decades, gold has held a unique position in Indian households, not only as a piece of jewelry or an investment, but also as a symbol of financial security, cultural continuity and long-term wealth preservation. It is estimated that India holds nearly 25,000 tonnes of domestic gold, worth over ₹126 lakh crore, making it one of the largest private gold reserves in the world.

Traditionally, this vast wealth remained largely dormant and could only be accessed in times of need through gold loans that were considered a last resort. Indian households are increasingly seeing the opportunity to reframe gold loans not as a necessary credit mechanism, but as a calculated approach to managing liquidity without having to part with valuable assets. This is a larger paradigm that addresses the changing situation in which consumers must deal with evolving concepts of secured financing products.

From emergency loans to planned liquidity

While in the past, gold lending was typically linked to an urgency, be it in the context of healthcare, agriculture or even income crunch, in the current scenario the context for gold lending has grown significantly in scope and intent. While in the past borrowers have tended to take out gold loans in a more ad hoc manner, the current pattern indicates a more considered and informed attitude towards lending.

Recent data also reflects this trend. Observably, the September 2025 edition of the CRIF High Mark report states that India’s retail and consumer loan portfolio has registered 18 percent year-on-year growth in the second quarter of FY26, while gold loans have grown 35.8 percent, making them the fastest growing segment in Indian retail loans. The expansion is also clearly visible in the portfolio trends.

RBI data shows that gold loan portfolios rose from ₹89,898 crore in November 2023 to ₹1.59 lakh crore in November 2024, and further to around ₹3.5 lakh crore in November 2025, almost doubling within a year. This rapid growth reflects both higher gold prices and increased borrower confidence in formal lending channels.

Gold loan market: a major and largely untapped opportunity

However, the amount of household gold monetized through formal lending channels is only about 5.6 percent. This once again underlines the great opportunities that await the formal gold financing market. As the need for credit for the household economy and micro-entrepreneurs increases, the opportunity for gold financing appears attractive, both as a countercyclical option and as a means of managing risk.

Although banks have gradually expanded their gold loan offerings, the role of non-bank financial companies, which initially spearheaded this cause, should not be forgotten, especially when it comes to advancing the cause of gold loans at the level of private households or small business owners.

Why NBFCs are at the center of the shift

NBFCs have been one of the major contributors to the change in mindset. The simplified documentation process, faster disbursement, flexible repayment systems and transparent valuation of the loans have made the gold loan accessible to the borrower. For many families, an option exists through the NBFC, a state of access to regulations that removes the need for alternative sources of credit. Most importantly, the gold loans provided by the NBFC segment are increasingly in line with sound lending standards, with borrowers able to retain ownership of the gold, thereby promoting a sense of confidence in the segment.

Policy and regulations strengthen trust

The Reserve Bank of India has implemented clear guidelines around loan-to-value (LTV) ratios, valuation standards and risk management practices. These measures have improved consumer protection while allowing lenders to effectively manage their exposure. Such regulatory clarity has helped formal gold lending gain legitimacy as a mainstream financial product, especially at a time when unsecured credit is increasingly scrutinized.

Changing consumer mindset: gold as productive capital

Central to all of this, of course, is a significant shift in consumer thinking, with consumers no longer viewing gold as ‘useless wealth set aside as an emergency fund’, but as ‘productive capital that can support their financial goals without being sold off’. This phenomenon is also confirmed by macroeconomic indicators. The increase in the price of gold has a positive impact on the prosperity of the people. It is estimated that an increase of ₹117 lakh crore has been added to the wealth of the people of India due to a rise in gold prices in a short period of one year. The increase in the price of gold results in an increase in its attractiveness as collateral for short-term financing.

Gold loans as a smart liquidity solution

In today’s market, the decision to take out a gold loan can be justified for several reasons, compared to other loans, which entail lower interest rates and a shorter term, do not affect the credit score and, most importantly, the property does not disappear from your own hands in the form of gold. It seems that the more the credit infrastructure develops and matures in India, the more the gold loans provided through the NBFCs will become part of the overall household planning scenario, rather than a last resort. The traditional and modern approaches adopted for the gold loans will make the entire scenario a smart move for the modern and financially conscious India.

The author is, director, Arvog

Published on January 25, 2026