Borrowers with more than ₹2.5 lakh outstanding showed a delinquency rate of 1.5% at the end of December, about 2.2x higher than those with lower exposures, the credit information company said in a report. The delinquency rate was higher at 1.9% for those accumulating more than five loans.
Kolkata: India's gold loan market is experiencing higher delinquency rates among borrowers availing of bigger and multiple loans. This trend of borrowers overextending themselves has raised the credit risk at such elevated exposure levels, said TransUnion CIBIL, though lenders generally expect to recover their dues fully by auctioning the gold mortgaged with them.
Borrowers with more than ₹2.5 lakh outstanding showed a delinquency rate of 1.5% at the end of December, about 2.2x higher than those with lower exposures, the credit information company said in a report. The delinquency rate was higher at 1.9% for those accumulating more than five loans. The average delinquency was at 1.1%, as per the report based on loans originating in the first half of 2025.
About 48% of these collateral-backed borrowers have more than ₹2.5 lakh in gold loans outstanding on average, indicating a growing tilt towards higher leverage. Notably, about 46% of borrowers with more than ₹2.5 lakh outstanding have more than five loans, making them more prone to default, as per the report.
Price Corrections
Gold loans, the second-biggest retail loan market after housing finance, accounted for 11% of India’s retail credit portfolio at the end of December, sharply up from 5.9% in March 2022, the data showed.
“As the gold loan segment expands, lenders’ priority must be to balance growth with prudence,” said Bhavesh Jain, managing director, TransUnion CIBIL.
India’s overall gold loan market stood at Rs 16.2 lakh crore at the end of December, compared with housing loans of Rs 43 lakh crore, according to Crif High Mark data.
The surge in gold loans is largely attributed to robust demand from small businesses and a runaway rally in the price of the yellow metal last year, allowing borrowers to draw bigger loans against their collaterals.
Lenders however turned cautious as gold retreated from record highs. The price corrected 15% in March alone from the peak soon after the Iran war started February 28.
Lenders however emphasised that they have enough cushion against price corrections as they typically follow a loan-to-value ratio of 60-65% against the earlier regulatory prescription of 75%.
“Collateral strength remains important, but it cannot be the sole criterion for evaluating borrowers,” said Jain. “Lenders will need to assess total borrower indebtedness, repayment capacity, recent credit behaviour and cross-lender exposure more holistically.”
The latest report suggested that borrowers with a history of serious delinquency who subsequently rely on gold loans face a significantly greater risk of disengagement from the formal credit system. Their credit-access closure rate was around 1.6 times higher than that of non-defaulting borrowers, suggesting that for a section of stressed borrowers, gold loans may increasingly be functioning as a product of last resort.
Banks are monitoring gold loan portfolios on a real-time basis following the sharp price correction, said Madan Sabnavis, chief economist at Bank of Baroda.
The origination value has risen 5.1 times since April 2022 while average ticket size has more than doubled to Rs 1.96 lakh from Rs 90,000 over the same period.
The growth underlines rising borrower adoption, higher ticket sizes, broader lender participation, and a borrower profile that increasingly includes consumers and women borrowers with more extensive credit histories, the report said.
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