- Gold loans could reach 10% of India's system credit from 2% in FY24 over five years
- Gold loans offer 300-600bps lower interest rates than unsecured personal and business loans
- Only 11% of gold held by lower-income households is pledged; NBFCs hold 3% of that
Gold loans are becoming India's fastest-growing retail credit category, and JPMorgan believes the shift is only getting started. In a note initiating coverage on the sector, the brokerage said gold loans' share of system credit could rise to around 10% over the next five years, up from just 2% in FY24 and 5% now, as gold evolves from a family heirloom to a monetizable asset. Citing this structural tailwind, JPMorgan initiated coverage on IIFL Finance, Manappuram Finance and Muthoot Finance, all non-banking financial companies (NBFCs) that specialise in gold-backed lending, with an "overweight" rating.
Gold loans, the brokerage said in its report titled "India Gold Lenders: The Credit Gold Rush," are "secured retail credit with robust growth" and the "next phase of growth should be structural rather than cyclical." It added that borrowers stand to benefit from a "300-600bps rate arbitrage" versus unsecured credit (a gap of 3 to 6 percentage points in interest rates), while lenders "grow a low-risk secured book."
Despite the sharp rise in gold loan disbursements over the past few years, JPMorgan believes penetration remains shallow. The brokerage estimates that only around 11% of gold held by bottom-60% households, ranked by income, is currently pledged as collateral, and just 3% of that by NBFCs specifically. It also pushed back on the common assumption that southern India, which holds nearly 40% of the country's household gold, is a saturated market. Gold loan penetration in the South, JPMorgan noted, "is on par with other regions," leaving "ample room to grow in a market holding ~40% of India's HH gold."
Gold Loans Replacing Personal Loans?
The brokerage's optimism rests on a simple substitution story: households and small businesses are increasingly choosing gold loans over personal and business loans. Gold loans' share of retail credit disbursements has jumped to 41% in FY26 from 18% in FY23, coming largely at the expense of unsecured personal and small business loans, whose share fell to 41% from 55% over the same period.
Gold loans in India have been rising versus personal loans.
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JPMorgan said the shift is being driven by the lower cost of a gold loan compared with a personal loan, along with rising financial literacy among borrowers who are increasingly willing to "monetize idle household jewellery" to meet short-term liquidity needs such as education, medical emergencies and travel, as well as small businesses using gold loans for working capital. The brokerage flagged that this substitution is "particularly pronounced" among sub-prime borrowers, those with weaker credit scores, who are being drawn by the wide gap between unsecured and gold-loan pricing.
JPMorgan also flagged that gold loans carry the lowest bad-loan ratio among retail credit categories, at around 0.2% versus 0.5-0.6% for mortgages and auto loans, and above 1% for unsecured products. It said this asset quality has held up even through sharp swings in gold prices, since collateral coverage and reasonable loan-to-value ratios (LTVs, the loan amount as a percentage of the pledged gold's value) of 55-65% offer a wide margin of safety. Recent regulatory changes on lending against gold, effective from April 2026, have raised headline LTV caps in a tiered manner while tightening how collateral is valued, a shift JPMorgan expects to be broadly neutral for established gold-NBFCs, given they already operate at conservative levels.
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