Retail Gold Loans: The Shining Star in Banks’ Loan Portfolios
Retail gold loans are shining bright in banks’ overall loan portfolio on the back of a rise in gold prices, demand shift from unsecured loans, and borrower-friendly regulations. This is underscored by the fact that their net portfolio growth in the Loans Against Gold Jewellery (LAGJ) segment — under the personal loans category — topped the ₹1 lakh crore mark for the first time in any half of a financial year in H1 FY2026.
Banks’ LAGJ portfolio jumped about 51% (₹1,07,307 crore) in the first half (April–September) of FY2026. This portfolio was up about 43% (₹44,519 crore) in H1 of FY2025. Their LAGJ portfolio had expanded by ₹61,654 crore in H2 (October–March) of FY2025.
Given the uptrend in gold prices, borrowers are able to secure higher loan amounts for the same quantity of gold pledged with lenders.
Surging Prices
The price of gold (995 fineness) rose about 29% to ₹1,14,887 per 10 g as of September-end, compared with ₹88,807 on March 28, 2025, per IBJA data.
At a loan-to-value (LTV) ratio of 75%, a borrower could receive ₹86,165 as a loan (on September 30, 2025) against a pledge of 10 g of gold, versus ₹66,605 as on March 28, 2025.
Canara Bank Managing Director & CEO K. Satyanarayana Raju attributed banks’ gold loan growth to the comfort of regulatory reforms.
These include:
A higher LTV of 85% (up from 75%) following RBI’s June 6, 2025 directive on lending against gold and silver collateral,
Loans allowed against voluntary pledges of gold and silver for agriculture up to the collateral-free limit of ₹2 lakh, and
Loan renewals permitted after payment of accrued interest.
A Safer and Stronger Lending Segment
BK Divakara, Executive Director, CSB Bank, observed that gold loans are safe and secured, as credit risk is mitigated to a large extent.
“Since the collateral pledged is highly liquid, there will not be any credit loss as such. Yield on gold loans is also relatively better compared to other retail advances,” he said.
AM Karthik, Senior Vice-President and Co-Group Head – Financial Sector Ratings, ICRA, added that the organised gold loan market will expand further due to elevated gold prices and lower growth in unsecured loan products.
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