The gold loan market in India is experiencing remarkable growth, mirroring the broader upward trends seen across various sectors, from the stock market to retail. As people increasingly seek financial solutions, there has been a significant rise in the practice of taking out loans against gold, with many individuals opting to use their gold assets as leverage for quick funding. A recent report projects that the gold loan industry is on track to double its size in the next five years.
Projected Market Growth in the Next Five Years
Despite strict regulations potentially tempering growth, the organized gold loan market in India is expected to double, reaching an estimated value of ₹14.19 lakh crore by 2028-29. According to a report published by PwC India, the valuation of the organized gold loan sector stood at ₹7.1 lakh crore for the financial year 2023-24, indicating robust growth.
The report further predicts an annual growth rate of approximately 14.85%, driven by the substantial amount of gold held by Indian households, estimated to be around 25,000 tons. The current value of gold assets owned by these families is approximately ₹126 lakh crore, highlighting the significant collateral available for loans.
Short-Term Trends: A Preview Over the Next Two Years
In the coming two years, a moderate growth trajectory is anticipated for the gold loan sector. Lenders providing loans against gold will face increased scrutiny from regulatory authorities regarding their loan-to-value (LTV) ratios and auction processes. The report points out that the exit of the second-largest player in this market may impact growth rates for the current financial year.
Current Regulatory Landscape
As it stands, non-banking financial companies (NBFCs) are advised by the Reserve Bank of India (RBI) to limit cash disbursement to ₹20,000. This regulation may push customers towards unorganized sectors for their gold loan needs. Additionally, there are growing concerns from the regulator about the evaluation processes for loan activities conducted via fintech startups. PwC notes that regulatory compliance and updated guidelines have led to a decline in the stock prices of major NBFCs.
During this period, gold loan lenders are expected to utilize their resources to ensure adherence to regulatory guidelines while also optimizing their middle and back-office operations through various digital initiatives.
Table: Overview of Gold Loan Market Projections
| Year | Market Value (₹ Lakh Crore) | Projected Growth Rate (%) |
|---|---|---|
| 2023-24 | 7.1 | – |
| 2028-29 | 14.19 | 14.85 |
