Gold Loans Surge 128% to ₹3.38 Lakh Cr: RBI Flags Household Shift to Asset-Backed Borrowing

Bank credit data show that loans against gold jewellery have been recording triple-digit growth rates since February 2025, far outpacing overall credit expansion, according to the Reserve Bank of India's State of the Economy report for December 2025. While gold loans still account for a relatively small share of total non-food credit, their proportion has nearly doubled over the past year, indicating a rapid change in borrowing preferences, it said.

As per the recent RBI data, the loans against gold jewellery have become the unlikely star of retail credit with outstanding balances in this category surging 128.5% year-on-year to Rs 3.38 lakh crore in October 2025.
A sharp rise in gold-backed lending in recent months points to a significant shift in household financial behaviour, as families increasingly tap into idle gold assets to meet consumption and liquidity needs amid evolving economic conditions, it said.

Economists in the article attribute the surge to a combination of high gold prices, softer interest rates, and easy accessibility of gold-backed credit compared with unsecured personal loans. With gold prices at elevated levels, households are able to unlock higher loan values against the same quantity of jewellery, making gold loans an attractive short-term financing option.

The trend also reflects a broader shift toward asset-backed borrowing, particularly among households and small businesses seeking liquidity without committing to long-term debt. Unlike personal loans or credit cards, gold loans typically carry lower interest rates and quicker disbursal, making them suitable for meeting working capital needs, seasonal expenses, or emergency consumption.

The RBI noted that despite the rapid growth, the overall exposure remains contained, limiting immediate financial stability risks. However, the central bank is closely monitoring the segment, given its sensitivity to fluctuations in gold prices and the potential impact on household balance sheets if prices were to correct sharply.

The expansion in gold loans has coincided with strong domestic demand and easing inflation, which together have supported broader credit growth across sectors. Bank lending to households, industry, and services has remained robust, even as global uncertainties continue to weigh on capital flows and financial markets.

Analysts say the rise in gold-backed lending underscores how Indian households are adapting their financial strategies in a changing macroeconomic environment leveraging traditional assets to navigate modern credit needs while remaining cautious about unsecured borrowing.