The big daddies in the gold loan space, such as Muthoot Finance and Manappuram Finance, have some serious competition coming their way as diversified large non-banking finance companies (NBFCs) are entering their turf, given that lending in this space is secure, recovery easy and non-performing assets low.

Diversified NBFCs such as Tata Capital, Aditya Birla Capital, L&T Finance and Godrej Capital have taken a plunge in this space either through the acquisition of smaller, specialised gold loan players or branch expansion plans.

This comes in the backdrop of unsecured credit and microfinance segments seeing asset quality cycles.

The lure of this business can be gauged from the credit growth of NBFCs in the loans against gold jewellery (LAGJ) segment. They notched up a 68.5 per cent year-on-year (yoy) credit growth in the LAGJ business as at July-end 2026, against 43.9 per cent as at July-end 2025, as per RBI data.

“NBFCs are giving gold loans at 12–18 per cent interest rate. Since gold is liquid collateral, the question for lenders is: Why take the risk of unsecured lending at 12–18 per cent when they can get a secured business at similar rates?

“Gold loans are also short-tenor loans, generally one year or less. While there may be some variation in non-performing assets (NPAs), the ultimate loss from a default is negligible because the lender has the gold as collateral. That is what is enticing everybody,” said a senior official with a credit rating agency (CRA).

Surging AUM

Gold loan assets under management (AUM) has grown sharply over the last couple of years, largely because of the rise in gold prices. NBFCs’ LAGJ portfolio has more than doubled in the last two years from ₹1,45,986 crore as at July-end 2025 to ₹3,53,988 crore as at July-end 2026.

As at June-end 2026, Muthoot Finance and Manappuram Finance had standalone gold loan AUM of ₹1,63,299 crore and ₹54,655 crore, respectively.

Gold price jumped from about ₹69,000 per 10 gm as at July-end 2024 to a peak of about ₹1.64 lakh as at January-end 2026, and currently rules at about ₹1.54 lakh.

Given the rise in the yellow metal’s price, borrowers are able to get a bigger loan against it. “Gold prices have been stable or marginally down over the last six months. The key question is whether this shift towards gold loans can continue.

“There is a view that gold prices will not crash, given their historical performance and the prevailing global uncertainties. If loans are short-tenor, borrowers generally repay them sooner or refinance them with another lender. So, the industry is currently riding the momentum,” the CRA official said.

Ajay Manglunia, Executive Director, Capri Global Finance Ltd, said that unlike unsecured loans, gold loans offer lenders strong collateral security. So, if a borrower defaults, the lender can follow the required formalities, auction the gold and recover the money. As a result, the asset quality is generally better in the case of gold loans than other loan categories.

Since gold loans are secured and there have been asset quality challenges in the unsecured loans and microfinance segments, some of the larger NBFCs are positioning themselves as lenders with more secured assets and lower unsecured exposure. This is helping build a narrative that their book is safer than that of their peers.

Growth plans

A year ago, L&T Finance Ltd (LTF) acquired the gold loan business of Paul Merchants Finance Pvt Ltd (PMFL), a wholly-owned subsidiary of Paul Merchants Ltd. This acquisition included PMFL’s 130 branches, nearly 700 employees, and the business transfer of its ₹1,350-crore gold loan book to LTF, marking its entry into gold loans.

Sudipta Roy, MD and CEO, said, “Gold loans will be one of our fastest-growing businesses. We expect the gold loan portfolio to expand from about ₹3,000 crore today to nearly ₹40,000 crore by 2031.

“Inorganic growth is not our primary strategy, but we remain open to opportunities that satisfy three conditions: They are of an easily integrable size; they fill a strategic capability gap; and they are available at an attractive valuation. That was the rationale behind our acquisition in the gold loan business.”

In July this year, Tata Capital Ltd (TCL) announced that its board had approved the proposed acquisition of Yogakshemam Loans Ltd (Yogloans), an RBI-registered NBFC primarily focused on gold loans. This signals TCL’s entry into the gold loan business.

Yogloans operates through a network of 162 branches across Kerala, Karnataka, Tamil Nadu, and Andhra Pradesh, with AUM of ₹708 crore as of March 31. The company serves around 32,000 gold loan customers and has built strong capabilities in sourcing, underwriting and servicing in its decade-plus presence in the gold loan business.

Godrej Capital, through its subsidiary Godrej Finance Ltd, also announced the acquisition of the gold loan business of Kanakadurga Finance Ltd in July. This is the company’s first strategic acquisition and marks its entry into gold loans.

The acquisition gives Godrej Finance about ₹280 crore AUM, nearly 12,000 customers, 54 operational branches across Andhra Pradesh, and a team of around 250 employees.

Pankaj Gupta, MD and CEO, Godrej Finance, said, “Gold loans are one of India’s fastest-growing secured lending categories, supported by increasing formalisation, strong customer demand and growing preference for organised lenders. We view this as a category with significant long-term potential.”

He emphasised that the Kanakadurga acquisition came at the right time, as local expertise, customer trust and operating experience are valuable assets in a gold loan business.

“This acquisition accelerated our entry into the gold loan category by providing access to experienced teams, trusted customer relationships and deep market understanding, while allowing it to build on an established franchise rather than starting from scratch,” Gupta said.

Last month, Aditya Birla Capital Ltd (ABCL) announced its entry into the gold loan business. It plans to open 1,000 gold loan branches in the next three years.

Bajaj Finance is revving up its gold loans business. In the first quarter of FY27, the NBFC added 194 gold loan branches, taking the total to 1,701 (from 1,254 branches as at June-end 2025). The company expects to close FY27 with a network of about 2,800 gold loan branches.

A gold loan industry expert observed that there is interest across the market. Players such as IIFL Finance and Capri Global Finance have also become fairly significant in the gold loan segment. Most of this growth happened over the last one and a half years. Therefore, when one looks at year-on-year numbers, the percentage jump is quite sharp.

“We have not really seen a full gold loan cycle. In unsecured lending and microfinance, we have seen bad cycles. But gold has steadily appreciated over the last five to seven years. So, we have not experienced a similar downturn in gold lending. That is something to watch. Otherwise, the near-term outlook appears fairly positive,” the expert said.

With the “gold rush” among large NBFCs, competition in the gold loans segment is expected to heat up further.

Gold loan rates may also start to fall, depending on how aggressively the new entrants want to compete.

Published on September 14, 2026