Mumbai: India’s scorching gold-loan boom — one of the fastest-growing segments in retail credit — is beginning to flash warning signs. On their second-quarter earnings calls, Bajaj Finance and Piramal Finance both flagged early repayment stress in the segment, raising questions about whether the surge in gold-backed lending reflects genuine credit demand or something more worrying.
The starkest red flag came from Piramal Finance managing director and chief executive Jairam Sridharan, who disclosed that 15 to 23 per cent of gross industry gold-loan disbursements in 2025-26 went to borrowers who were already more than 90 days overdue on at least one other loan — an estimated Rs 4.7 trillion in such lending. Sridharan called it “a shockingly high number”, a phrase that has since reverberated through analyst notes and dealing rooms.
Bajaj Finance’s disclosures told a similar story from a different angle. The lender’s stage-2 and stage-3 assets — loans showing significant credit deterioration or in default — rose by Rs 1,601 crore in the September quarter, of which Rs 1,047 crore came from gold loans alone. The company has responded by moving away from short-tenor gold loans, a segment where rollover risk and evergreening are hardest to monitor.
Adding intellectual heft to the concern, Macquarie warned that the surge in gold-loan disbursements may partly reflect borrowers pledging gold merely to repay overdue loans with other lenders — a form of distress refinancing dressed up as fresh credit demand. If that thesis holds, headline growth in the segment could be masking a rotation of bad debt rather than healthy expansion.
The scale of the exposure makes this more than a niche worry. Gold loans are now India’s second-largest retail loan book: banks carry Rs 5.59 trillion in gold loans and NBFCs another Rs 3.64 trillion, according to Reserve Bank of India data cited in the coverage. A stress event in a book this large would not stay contained — it would ripple through funding markets, securitisation pools, and the broader NBFC sector.
To be clear, this is a credit-quality story, not a gold-price story. The collateral values remain robust; the question is about borrower behaviour. Gold loans have traditionally been among the safest retail products precisely because the collateral is liquid and marked to market daily. But when lending standards loosen at the margin — shorter tenors, aggressive disbursement targets, borrowers already stressed elsewhere — even the safest collateral cannot fully protect the lender.
The timing is uncomfortable for the industry. NBFCs have leaned heavily on gold loans as a growth engine while unsecured segments like personal loans and credit cards face regulatory tightening. Any forced slowdown in gold-loan disbursements would remove one of the sector’s few remaining high-growth avenues.
Regulators will be watching closely. The RBI has in recent years shown zero tolerance for evergreening and lax underwriting, and the disclosures from two major lenders in a single earnings season are exactly the kind of signal that invites supervisory attention. For investors, the message from October’s earnings calls was unambiguous: the gold-loan party is still going, but the bouncers have started checking IDs.
