How the Gold Loan Market Has Grown Over the Last Decade

The gold loan market has witnessed significant growth over the past decade, largely driven by robust economic trends. As more individuals seek access to quick and hassle-free financing options, gold loans have emerged as a popular choice. In this article, we will delve into market analysis of gold loans, exploring its growth, analysing economic trends, and understanding how you can benefit from it. 

Gold Loan Market Growth Seen in the Last Few Years 

The gold loan market has seen whopping growth rates in the last few years. As of FY 2023-24, the organised gold loan market was valued at approximately ₹7.1 lakh crore, with projections to exceed ₹10 lakh crore in the current fiscal year and reach ₹15 lakh crore by March 2027.

The sector has expanded at a compounded annual growth rate (CAGR) of about 25% from FY 2020 to FY 2024. This growth is primarily attributed to banks, which have seen a CAGR of 26%, while non-banking financial companies (NBFCs) have expanded at 18% during the same period. 

Future Projections of Gold Loan Growth In India 

Market analysis of the organised gold loan market shows that it could double in size over the next five years, reaching approximately ₹14.19 lakh crore by FY 2029, with a CAGR of around 14.85%. Ongoing trends in consumer demand for financial products and favourable economic conditions will likely support this growth. 

Market Analysis of Drivers for Gold Loan Market Growth

Market analysis shows that the key growth drivers are as follows: 

1. Rising Gold Prices

The surge in gold prices has significantly increased the value of collateral for loans. For instance, international gold rates rose by nearly 60% over two years, allowing borrowers to secure higher loan amounts against the same quantity of gold. 

2. Financial Inclusion

The expansion of financial services and greater access to credit have made gold loans an attractive option for individuals who may not qualify for unsecured loans. This trend has been particularly pronounced as banks and NBFCs have tightened their lending criteria for unsecured loans

3. Cultural Affinity

In India, gold is not only a form of investment but also a cultural asset. The high ownership of gold (estimated at around 25,000 tonnes) among Indian households supports a robust market for gold loans. 

4. Market Penetration

Despite the growth, the organised sector accounts for only about 5.6% of the total market, indicating substantial potential for further expansion as more players enter the market and unorganised sectors are brought into the fold. 

5. No Credit Score Requirement

Unlike many conventional loan products, gold loans do not require a credit score check. Borrowers are primarily evaluated based on the value of the gold they pledge, making it easier for individuals with limited credit histories to secure financing

6. Competitive Interest Rates

Gold loans typically feature lower interest rates compared to other borrowing options, making them a cost-effective solution for individuals seeking funds. This affordability enhances their attractiveness in a competitive lending landscape. 

7. Growth of NBFCs and Digital Platforms

Non-banking financial companies (NBFCs) are expanding their portfolios significantly, projected to grow by 17-19% in FY2025. The emergence of digital platforms and fintech partnerships has also made it easier for consumers to access gold loans, tapping into previously underserved markets

Public Sector Banks Capturing a Big Chunk of Gold Loan Market Growth 

Let's take a look at the share of public sectors banks and NBFCs in the gold loan market. 

• Bank Dominance: Public sector banks have increased their market share in gold loans from 54% in March 2019 to approximately 63% by March 2024. They are primarily focused on agriculture loans secured by gold jewellery. 
• NBFC Growth: Market analysis shows that NBFCs continue to play a significant role in the retail segment, with expectations of expanding their portfolios by 17-19% in FY 2025. They offer competitive interest rates and quicker processing times compared to traditional banks.