Wednesday, 27 May, 2026
Source of the image: Reuters
What was once considered emergency borrowing is now a mainstream credit option in India, with southern states continuing to dominate the country’s booming gold loan market.
India’s gold loan market is growing at a pace rarely seen in retail lending. What was once viewed largely as an emergency borrowing option has now become one of the country’s fastest-expanding credit segments, driven by rising gold prices, quicker access to loans, and a visible shift towards secured borrowing.
According to data from CRIF High Mark, gold loan outstanding across banks and non-banking finance companies (NBFCs) reached nearly Rs 18.6 lakh crore by March 2026, marking a sharp 50.4 per cent year-on-year rise. Over a longer period, the growth has been even more dramatic. India’s gold loan portfolio has expanded nearly sevenfold since March 2020, when outstanding loans stood at Rs 2.63 lakh crore.
The rise has largely been fuelled by higher gold prices, which have increased the value of pledged jewellery and allowed borrowers to access larger loan amounts. At the same time, many households are increasingly preferring gold-backed loans over unsecured borrowing because they are easier and faster to obtain, often requiring minimal paperwork.
The expansion has been so rapid that gold loans have now emerged as the second-largest retail lending product after home loans. Industry executives say the segment is no longer limited to emergency financing. Borrowers are increasingly using gold loans for business needs, education expenses and other income-generating purposes, reflecting growing comfort with using household gold as a temporary liquidity tool.
Yet beneath the broader national growth story lies a striking regional imbalance. Southern India continues to dominate the country’s gold loan landscape. Five southern states- Tamil Nadu, Andhra Pradesh, Karnataka, Telangana and Kerala- together accounted for nearly Rs 13.94 lakh crore of the total gold loan outstanding as of March 2026, roughly three-fourths of the national portfolio. Tamil Nadu alone accounted for nearly Rs 5.96 lakh crore, constituting around 32 per cent of the country’s total gold loan market. Andhra Pradesh followed with Rs 3.08 lakh crore, Karnataka Rs 1.81 lakh crore, Telangana Rs 1.60 lakh crore and Kerala Rs 1.45 lakh crore as of March 2026.
The dominance of southern states is closely tied to the region’s deep cultural affinity for gold and the presence of an extensive lending network built over decades by banks and NBFCs. Gold jewellery ownership has traditionally been higher in the South, making gold-backed credit more deeply embedded in household financial behaviour.
In contrast, several populous northern and western states continue to account for relatively modest shares of the market. Uttar Pradesh, despite being India’s most populous state, had gold loan outstanding of just over Rs 42,300 crore by March 2026. West Bengal stood at around Rs 35,000 crore, Rajasthan at Rs 41,700 crore and Gujarat at Rs 57,100 crore.
Still, the latest data suggests that the geography of gold lending is slowly beginning to change. While southern states continue to dominate in absolute terms, some of the fastest growth is now emerging from states that historically remained underpenetrated. Gold loans in Uttar Pradesh and Bihar have risen more than thirteen-fold since FY20, while Rajasthan has recorded over eleven-fold growth during the same period. Northeastern states such as Arunachal Pradesh, Assam and Tripura have also witnessed exceptionally rapid expansion from a smaller base.
This shift is gradually reducing the South’s share in the national portfolio. Tamil Nadu’s contribution to India’s gold loan market has declined from 36.4 per cent in March 2020 to 32 per cent in March 2026. Kerala’s share has fallen even more sharply, from 14.1 per cent to 7.8 per cent.
Another notable trend is the increasing role of gold loans within household borrowing itself. Across India, gold loans accounted for 15.7 per cent of total consumption loans in March 2026, up sharply from 5.4 per cent in March 2020. The surge has also altered the competitive landscape within the lending industry. Public sector banks still account for the largest share of gold loan originations by value, though their dominance has weakened over the past two years. NBFCs, meanwhile, have emerged as the fastest-growing players, particularly in smaller-ticket loans, helped by faster processing and wider distribution networks.
Interestingly, the rapid growth in lending has not led to deterioration in repayment quality. According to the report, delinquency levels in the gold loan segment improved between March 2025 and March 2026 across all major ticket sizes, suggesting that borrowers have largely managed repayments despite the sharp increase in borrowing.
The bigger shift, however, may be psychological. Gold loans are increasingly moving away from their older image as a distress-driven borrowing option. Rising gold prices and easier access to secured credit have transformed gold jewellery into a widely used financial asset for short-term liquidity. For millions of households, especially at a time of economic uncertainty and rising expenses, gold is no longer just stored wealth. It is becoming an active part of everyday finance.
