Gold loans grow 125% in a year, 10x bank credit

MUMBAI: Gold loans have recorded a 125% year-on-year surge as of end-Nov 2025 - over 10 times the 11.5% growth in overall bank credit. The rise in gold loans follows a 77% increase last year and coincides with the rally in gold prices.

Although outstanding gold loans of Rs 3.6 lakh crore accounted for less than 2% of total bank credit, they contributed 12% of incremental lending up to Nov 2025. Over the last 12 months, accretions to the portfolio were estimated at Rs 1.5 lakh crore.

Bankers attributed the surge to three factors: lenders' preference for secured credit, a sharp rise in gold prices that has given households greater borrowing headroom, and a limited reclassification of some retail loans after RBI directed banks that farm loans backed by gold jewellery should be classified as gold loans.

Gold loans and micro and small enterprises have emerged as key drivers of credit growth. Loans to micro and small enterprises, which make up about 5% of the outstanding loan book at Rs 9.5 lakh crore, accounted for a similar 12% share of fresh credit, adding Rs 1.5 lakh crore in FY26. Together, these trends pointed to a rising demand for secured personal borrowing and a renewed banking focus on small-ticket, priority-sector lending. As large companies retreat from bank borrowing and lenders grow wary of unsecured loans, the banking sector's credit mix is shifting away from its traditional anchors.

The latest figures also indicated that the large industry is losing momentum. Despite forming 15% of outstanding credit at Rs 28.7 lakh crore, it accounted for just 3.6% of incremental loans, with fresh additions of Rs 46,090 crore. The data suggested continued deleveraging by large firms and a preference for bond markets or internal accruals over bank finance. Credit to weaker sections also lagged, drawing 6% of new lending despite representing about 10% of the outstanding book. Within personal loans, housing showed a relative slowdown: mortgages make up 16% of outstanding credit but captured only 14% of incremental flows.

Overall, personal loans remained the largest engine of growth, contributing nearly 40% of incremental credit, while services added about 20%, driven largely by NBFCs and trade. With total outstanding bank credit at Rs 195.2 lakh crore, data up to Nov 2025 point to a structural pivot away from large industry and towards consumers and small businesses, shaping banks' returns and risks in the years ahead.