Representative Image
MUMBAI: Gold loans, the fastest-growing segment in retail credit for several years, are now showing a sharp improvement in asset quality, driven in part by a surge in new borrowers that has diluted delinquency ratios even as the market undergoes structural expansion, according to an Experian report.The report, titled “Gold Loans in Transition: Market Evolution & Consumer Patterns,” shows that gold loans have dramatically outpaced all other retail credit categories, with sourcing value rising 69% in FY25 and accelerating further to 84% in FY26. Their share in total retail credit sourcing climbed from 20% in FY24 to 30% in FY25 and reached 41% in FY26, underscoring a decisive shift in lender and borrower preference toward collateral-backed credit.According to the report rising gold prices unlocked higher credit per asset. RBI’s curbs on unsecured-loan (through higher risk weights) also nudged lenders/borrowers to gold-backed credit. The tweaks to the loan to value requirement also helped pull in first-time users. Growth has spread beyond the traditional bastion of south India. Uttar Pradesh/West Bengal/Maharashtra led, widening adoption across new borrower cohorts. Ticket sizes doubled from Rs 0.98 lakh (FY23) to Rs 1.96 lakh (FY26). Among lenders, NBFCs gained share because of their speed and distribution edge. Tenures shrank with sub-3-month loans accounting for 47% (FY26 Q3), signalling short-term liquidity use.In value terms FY26 Q4 sanctions jumped 105% year on year while in volume the growth was 37% indicating the shift to higher value loans. The assets under management surged 44% by Mar’25, 49% by Mar’26.Asset quality has, on the surface, improved markedly. Net 30 days plus delinquencies have fallen from 2.2% in March 2023 to 1.0% in March 2026, and net 90 days plus from 0.4% to 0.2%. This owes less to credit behaviour than to a higher base: a surge in fresh lending has swollen the denominator, compressing delinquency ratios.The risks, meanwhile, have migrated. What was once a product story is now a borrower story. Repeat customers, far from merely rolling over loans, are layering gold-backed credit with unsecured personal borrowing, raising leverage and fragility. Those straddling both segments exhibit more volatile 90 days plus delinquencies than borrowers anchored in secured credit alone.Nor has systemic risk vanished. Growth, driven largely by rising collateral values, leaves portfolios exposed to any sharp correction in gold prices. Stress, too, has not disappeared so much as retreated into the margins: sub-Rs 1 lakh loans continue to show strain, a reminder that for lower-income borrowers, the glitter of gold-backed credit can still mask underlying repayment stress. Experian has called for a shift from collateral-led to borrower-level underwriting to track cross-product leverage, tighten exposure monitoring, and strengthen risk governance as tickets scale and the market deepens.
