Bank gold loans on a tear as customers want more for their pledge

Core Insights - The surge in gold loans is driven by rising gold prices and a tightening of unsecured lending options like personal loans and credit cards [1][4][12] Group 1: Gold Loan Market Dynamics - In FY26, banks disbursed ₹85,432 crore in gold loans, surpassing home loans which totaled ₹70,675 crore [2] - Gold prices increased by 23% this fiscal year, reaching ₹109,390 per 10 grams, allowing borrowers to secure larger loans against the same amount of gold [3] - Gold loan disbursals grew by 40.9% since the end of March and 122% year-on-year, while home loans only rose by 2.3% since end-March [5] Group 2: Borrower Behavior and Trends - Approximately 60-70% of gold loan customers are repeat borrowers, indicating a reliance on gold loans for urgent financial needs [6] - The tightening of unsecured lending channels has led small businesses to utilize gold loans for working capital [4] Group 3: Competitive Landscape - Traditional non-bank financial companies (NBFCs) have seen increased competition from banks entering the gold loan market, with major public sector banks like SBI and BoB actively promoting gold loans [7][11] Group 4: Regulatory Environment - The Reserve Bank of India (RBI) has allowed banks to lend more against gold by increasing the loan-to-value ratio, contributing to the growth of the gold loan sector [10] - Regulatory changes are addressing the classification of gold loans, preventing banks from misclassifying regular loans as agricultural loans, which previously allowed for higher lending limits [14][15]