- The gold finance sector is growing rapidly, driven by high gold prices and securitisation volumes
- Securitisation volume reached a record Rs 60,000 crore in Q1 April-June 2026, up 22 percent
- Gold loans now form 31 percent of securitized assets, surpassing vehicle loans in volume
The gold finance segment is currently witnessing a strong growth phase, bolstered by high gold prices, healthy securitisation volumes, and a clear shift away from unsecured lending. The securitisation market had its strongest-ever first-quarter volume as issuances surged 22% to a peak of Rs 60,000 crore in April-June 2026. Latest data by CRISIL has revealed that over 98% of securitized volume driven by transactions originating from non-banking financial companies (NBFCs).
Gold loans have emerged as the largest asset class, overtaking vehicle loans, accounting for nearly 31% of the overall securitized volume. Speaking to NDTV Profit in an exclusive interview on July 7, Krishnan Sitaraman, Chief Ratings Officer at Crisil Ratings, said that the gold finance segment has been in a "sweet-spot" for both NBFCss and banks. Even as Sitaraman noted that vehicle finance is still the largest asset class, the precious metal has been supported by a robust economic backdrop.
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Several structural and cyclical factors have propelled the growth for gold loans and securitisation demand, according to the expert. A primary driver behind the sector's momentum is the strong underlying demand for gold loans, which is expanding the Assets Under Management (AUM) for gold finance companies. As their loan books grow, the companies require additional funding, pushing them toward the securitisation market in the current market scenario.
Minimal NPAs, Minimal Credit Loss: A win-win scenario
Sitaraman noted that there is significant investor appetite for the securitised paper of gold finance companies, creating clear tailwinds for companies moving to securitisation. This dynamic creates a "win-win" scenario. The originators receive the funding they need, and investors-including banks and mutual funds-secure risk-adjusted returns. Consequently, CRISIL expects to see a continued uptick in the NBFCs' gold loans portfolio and their securitisation volumes.
Unlike other asset classes, gold loans offer lenders relative comfort due to the high quality and liquidity of the collateral. According to Sitaraman, non-performing assets (NPAs) are minimal due to the strong performance of these underlying loans. Since gold is a highly liquid asset, lenders can recover their dues through an auction process in the rare event of a default. Historically, the principal outstanding loss is minimal for gold loans, provided lenders now manage operational risks like fraud and collateral purity.
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Shift from unsecured lending
Even as credit loss risks are minimal in gold loans, the recent surge in gold financing is not solely driven by the rising value of gold. It is also a byproduct of tighter lending standards elsewhere. Unsecured loans, particularly in the microfinance space, have been stressed over the last two years due to overleveraging concerns, CRISIL's Sitaraman told NDTV Profit.
In response to rising delinquencies in unsecured markets, lenders have tightened their guardrails and become much more selective. Borrowers who previously relied on unsecured channels are now crossing over to the gold loan market to meet their credit needs. Driven both by the rising value of gold allowing borrowers to unlock more capital, and the restricted access to unsecured credit, the gold loan portfolio for NBFCs is poised for continued resilience, according to CRISIL.
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