Gold loans have become one of India’s fastest-growing forms of household credit, but the latest disclosures from Bajaj Finance and Piramal Finance show why collateral does not eliminate repayment risk. The lenders have reported early signs of stress even as banks and non-bank finance companies expand lending against household gold at a rapid pace.
The scale of this expansion is central to the story. Bank loans against gold rose 83% year-on-year to Rs 5.6 lakh crore in August 2026, according to the latest Reserve Bank of India data cited in the report. For non-bank lenders, gold loans rose 69% to Rs 3.6 trillion during the same period, based on separate RBI data. These figures show that gold-backed lending is no longer a peripheral credit product. It has become an important part of the formal lending system.
That growth has been driven by a straightforward proposition. Borrowers can raise funds against an asset they already own, while lenders receive security in the form of gold. Compared with unsecured personal credit, the structure appears safer because the lender can rely on pledged jewellery if the borrower fails to repay. This perceived protection has encouraged banks and non-bank lenders to increase their presence in the segment.
But the latest lender commentary shows that the existence of collateral does not explain the borrower’s capacity to repay. Bajaj Finance, which has a gold-loan portfolio worth Rs 240 billion, reported a rise in the proportion of loans overdue by more than 30 days during the July-September quarter. The company said its overall stage 2 and stage 3 assets, which reflect loans overdue by more than 30 days, rose 15 basis points from the previous quarter.
A significant part of that increase came from short-term gold loans, Bajaj Finance said. The company has stopped offering that product, according to the report. The decision is important because it shows how rapid growth can expose differences between the value of pledged collateral and the timing of a borrower’s cash flows. A loan may be secured, but a borrower facing an immediate repayment problem can still create a delinquency for the lender.
Piramal Finance has raised a broader concern about the concentration of borrowing. During a call with analysts, the company said that nearly 35% of its customers had a gold loan from another institution. Jairam Sridharan, the company’s chief executive, also said that in 2025-26, around the industry, Rs 4.7 trillion of gold-loan disbursements went to customers who had other loans overdue by more than 90 days.
These figures do not establish that every borrower with multiple loans is a high-risk borrower. Piramal’s own assessment was more cautious. Sridharan said that the presence of a gold loan on a borrower’s file was not, by itself, an indicator of higher portfolio risk. However, he described the data points as worth noting and tracking. That distinction matters: the concern is not that gold loans are automatically unsafe, but that lenders may be using the same collateral-backed product to serve borrowers whose wider repayment obligations are already under pressure.
This is the structural change behind the headline. Gold lending is moving from an emergency or niche borrowing channel into a scaled financial product offered by multiple institutions. As more lenders compete for the same borrowers, the relevant question shifts from whether the loan is secured to whether the borrower is accumulating several obligations at once.
For lenders, collateral can limit the eventual loss if a loan defaults, but it does not prevent operational and financial stress. Delinquencies can increase monitoring costs, require additional provisions and create pressure to change product design. The Bajaj Finance disclosure indicates that this process is already influencing lending decisions, with the company withdrawing short-term gold loans after identifying a disproportionate contribution to early stress.
For borrowers, the risk is different. Gold-backed credit converts a household asset into a source of immediate liquidity. If repayment becomes difficult, the consequences can extend beyond a missed instalment. The pledged asset may be exposed to recovery action under the terms of the loan. The supplied report does not provide details of auction volumes or borrower outcomes, so the extent of that impact cannot be established here. It does, however, show that repayment stress is emerging even in a segment built around a tangible security.
The numbers also complicate the idea that secured lending is insulated from wider economic conditions. Brokerages cited rising inflation among the risks facing Bajaj Finance, alongside possible Reserve Bank restrictions on revolving credit and tighter commission rules from the insurance regulator. These risks are not specific to gold loans, but they form part of the environment in which non-bank lenders are managing growth, household affordability and regulatory change.
The institutional responsibility is consequently spread across lenders and regulators. Individual lenders must assess not only the pledged gold but also the borrower’s total obligations and repayment history. The RBI’s role is visible through the data that tracks the expansion of bank and non-bank gold lending, while any future regulatory response would have to address how institutions identify overlapping loans without unnecessarily restricting access to secured credit.
The available data points to a market growing faster than the early signs of stress currently visible in reported portfolios. Bank gold loans rose 83% year-on-year in August, while non-bank gold loans increased 69%. At Bajaj Finance, the reported increase in stage 2 and stage 3 assets was 15 basis points quarter-on-quarter. These measures are not directly comparable, but together they show the two sides of the market: strong credit expansion and a still-limited, yet identifiable, deterioration in repayment performance.
Piramal Finance’s disclosure adds another layer by highlighting borrowers with loans from multiple institutions. Its estimate that nearly 35% of customers had a gold loan from another institution suggests that lender-level risk assessment may not capture the full picture unless institutions examine the borrower’s wider credit exposure. The report does not state how many of these customers were delinquent or how much of the overlapping borrowing was secured against the same assets. Those details remain important gaps in assessing the scale of the risk.
The market response was mixed. Bajaj Finance shares were trading 3.2% lower at Rs 926.80 as of 12:40 p.m. IST, while Piramal Finance shares were trading 3.7% higher at Rs 2,019.50. The benchmark Nifty 50 index was down 0.6%. The contrasting movements show that investors were responding not to a single industry-wide conclusion, but to different company-level earnings and risk signals.
The larger urban-economy question is how India’s expanding formal credit system is absorbing households that may have limited access to other forms of finance. Gold lending offers speed and a tangible security mechanism, but its rapid growth also makes it a useful indicator of how families and small borrowers are managing liquidity pressures. The supplied evidence does not establish the causes of individual repayment stress, but it does show why portfolio growth alone cannot be treated as a measure of healthy credit access.
What is established is that gold loans have expanded sharply, that leading non-bank lenders are monitoring early stress, and that multiple borrowing is becoming a material risk signal. What remains uncertain is whether these indicators will remain contained or broaden across the sector. The next developments to watch are lender disclosures on delinquencies, the treatment of short-term gold products, RBI data on continued growth and any regulatory response to overlapping borrower exposure.
