The organised gold loan market in India is poised for a substantial expansion in FY2025, with the total market size expected to cross Rs 10 lakh crore. A recent report from ICRA highlights the key factors driving this growth, including the increasing demand for gold-backed loans in both the agricultural and retail sectors. Non-banking financial companies (NBFCs) are leading the charge in the retail gold loan segment, while banks continue to dominate the agricultural gold loan space. The market is expected to grow even further, with projections of reaching Rs 15 lakh crore by 2027.
NBFCs: Powering the Retail Gold Loan Segment
NBFCs are set to dominate the retail gold loan segment in FY2025, with a projected growth rate of 17-19%, according to ICRA. Offering quicker loan disbursements, minimal paperwork, and flexible repayment options, NBFCs have become the preferred choice for individuals seeking short-term credit. The top four NBFCs currently hold 83% of the market share, although their dominance is slightly declining as new competitors enter the market.
Banks Hold Strong in Agricultural Gold Loans
While NBFCs continue to grow their retail portfolios, banks remain the undisputed leaders in the agricultural gold loan sector. With a focus on gold jewellery-backed loans for farmers and rural businesses, banks play a crucial role in providing credit for agricultural activities. The presence of banks in this sector ensures that rural India has access to the funds needed for crop cultivation and other essential agricultural work.
NBFC Market Share Declining as New Players Enter
The NBFC sector is witnessing increased competition, with newer players entering the gold loan market. While the top four NBFCs held a commanding 90% share two years ago, their market share has fallen to 83% as of March 2024. This competition is encouraging NBFCs to introduce more innovative loan products, enhance customer service, and adopt digital technologies to streamline their loan offerings.
Rising Gold Prices: A Key Factor
One of the significant factors contributing to the growing demand for gold loans is the steady increase in gold prices. Higher gold prices mean that borrowers can access larger loans against the same amount of gold, making gold loans an attractive option for those in need of immediate credit. This trend is expected to continue as gold prices remain volatile but generally on an upward trajectory.
Technology Boosting Gold Loan Sector Growth
Digital transformation is playing an increasingly important role in the expansion of the gold loan sector. NBFCs and banks alike are adopting digital platforms to make loan applications, approvals, and disbursements more efficient. With the convenience of online gold loan applications, consumers can access credit without needing to visit physical branches, further fueling the sector’s growth.
Future Projections: Rs 15 Lakh Crore Market by 2027
ICRA’s projections indicate that India’s organised gold loan market will reach Rs 15 lakh crore by March 2027. This growth will be supported by continued demand in both the retail and agricultural sectors, as well as the entry of new players into the NBFC space. With advancements in technology and rising consumer demand, the gold loan sector is set for sustained growth over the next few years.
The organised gold loan market in India is on track for significant growth in FY2025, driven by the leadership of NBFCs in the retail sector and banks in the agricultural sector. As competition intensifies and new players enter the market, innovation and digitalisation will be key to sustaining this growth. With the market expected to reach Rs 15 lakh crore by 2027, gold loans will continue to play a crucial role in meeting the financial needs of millions of Indians.
