Finance – Gold Loan Surge Drives Strong Growth in Retail Credit Market
Finance – The retail lending landscape witnessed a notable shift in the December 2025 quarter, as gold-backed borrowing emerged as a major contributor to overall credit supply. Fresh data from a recent market assessment shows a clear rise in the Credit Market Indicator for supply, largely fueled by a sharp increase in gold loan disbursements across both volume and value.
Gold Loans Lead Retail Lending Growth
Gold loans recorded a remarkable jump during the quarter ending December 2025. The number of loans issued rose by 45 percent, while the total value of these loans more than doubled, registering a 108 percent increase. This surge positioned gold loans as the largest contributor within retail originations, accounting for 36 percent of total loan volumes and 39 percent of overall value.
The rapid expansion highlights a growing preference among borrowers for secured credit options, especially those linked to tangible assets like gold.
Rising Gold Prices Boost Loan Values
One of the primary drivers behind this growth has been the sharp increase in gold prices over the past two years. Since March 2023, the value of gold has nearly doubled, significantly raising the borrowing capacity of consumers pledging gold as collateral.
As a result, the average loan size has increased by approximately 1.8 times. Borrowers are now able to access higher amounts against their assets, making gold loans a more attractive option for meeting financial needs.
However, this trend also suggests that future growth in this segment could remain closely tied to fluctuations in gold prices.
Strong Position in Outstanding Credit Portfolio
Gold loans have steadily strengthened their position within the broader credit market. They now represent the second-largest category in terms of outstanding retail loan balances, contributing around 11 percent. Only housing loans hold a larger share in this segment.
This development indicates that gold loans are no longer confined to short-term borrowing needs but are becoming a key component of long-term retail credit portfolios.
Expansion Beyond Traditional Regions
While southern states have traditionally dominated gold loan activity, accounting for more than half of all originations, other regions are now witnessing faster growth.
Western and northern states, particularly Rajasthan, Uttar Pradesh, and Madhya Pradesh, have shown strong momentum. Rajasthan recorded a 79 percent year-on-year increase in loan volumes, while Uttar Pradesh saw an even sharper rise of 96 percent.
This regional diversification points to increasing acceptance of gold loans across a wider geographic base.
Changing Consumer Profile
The borrower profile in the gold loan segment is also evolving. Lenders continue to prioritize individuals with established credit histories, with prime and above-category borrowers accounting for 57 percent of all originations.
Women constitute nearly 40 percent of the total customer base, reflecting growing financial participation. Additionally, a significant 68 percent of loans originate from rural and semi-urban areas, underlining the product’s accessibility and relevance beyond urban centers.
These trends suggest that gold loans are becoming a mainstream financial product, catering to a broader and more diverse group of borrowers.
Mixed Trends in Other Credit Segments
While gold loans dominated growth, other credit categories showed mixed performance during the same period. Home loans and consumer durable loans maintained steady progress, with housing loan values increasing by 13 percent despite previous slowdowns.
In contrast, credit card originations declined by 11 percent in volume, indicating cautious consumer behavior in unsecured lending.
Overall, the data reflects a shift toward secured borrowing options, with gold loans playing a central role in shaping the current retail credit environment.