India’s organized gold loan market is projected to double over the next 5 years, reaching US$ 169.07 billion (Rs. 14.19 lakh crore) at a compound annual growth rate (CAGR) of 14.85%, according to a PwC India report titled Striking Gold: The Rise of India’s Gold Loan Market. The market demonstrated significant growth in fiscal 2023-24, with a valuation of US$ 84.59 billion (Rs. 7.1 lakh crore). Indian households possess approximately 25,000 tonnes of gold, valued around US$ 1.50 trillion (Rs. 126 lakh crore). Despite this growth, the sector may face moderated expansion due to stricter regulatory scrutiny over loan-to-value (LTV) maintenance and auction procedures, alongside the impact of the second-largest market player being inactive in FY25.
The Reserve Bank of India’s (RBI) advisory limiting cash disbursement to US$ 238.29 (Rs. 20,000) may drive customers towards the unorganized sector. Concerns about fintech evaluation processes and heightened regulatory oversight have led to a drop in share prices for major non-banking financial companies (NBFCs). As gold prices rise, lenders are expected to adopt cautious lending practices to avoid LTV breaches. Banks and NBFCs will influence the market growth, with digital gold loan aggregators playing a crucial role in reaching digitally savvy customers. Mr. Jaikrishnan G from PwC India highlighted that gold lending remains attractive due to its high return on assets and manageable risk, with NBFCs expanding into new regions and fintechs driving innovation. South India dominates the market, holding a 79.1% share of outstanding loans. Not all the US$ 1.50 trillion (Rs. 126 lakh crore) worth of gold will be available for pledging due to various factors such as religious and emotional considerations.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.