Dodging bullet loans hurt gold NBFCs after RBI’s revised lending rules trigger repayment stress

Mumbai: Non-banking financial companies (NBFCs) are reassessing short-tenure and EMI-based gold loans after a spike in early delinquencies in the September quarter, as borrowers accustomed to traditional bullet-repayment plans struggle to adjust to more frequent repayment schedules.

Bajaj Finance has discontinued its short-tenure schemes, while Manappuram Finance is gradually shifting customers towards one-year loans. Muthoot Finance and Shriram Finance have also reported an increase in overdue loans linked to changes in repayment structures, though the lenders maintain that the underlying portfolios remain adequately collateralised.

The developments follow the Reserve Bank of India’s revised gold-lending framework that took effect from April 1, 2026. Several lenders subsequently introduced new repayment products requiring periodic interest payments or equated monthly instalments (EMIs), unlike traditional bullet loans where principal and interest are payable at maturity.


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Bajaj Finance posted a Rs 1,047 crore rise in stage 2 gold loans during the September quarter, largely attributed to short-tenure schemes introduced following the regulatory changes.

“We have, since August, stopped doing short-tenor schemes as a firm,” vice chairman and managing director Rajeev Jain said at the company’s earnings call. Management said around Rs 550 crore of the affected portfolio had already returned to stage 1 by the time of the call.

Customers Still Adjusting

Manappuram Finance is also reducing its reliance on shorter-tenure schemes after stage 2 gold loans increased to approximately 5% of its portfolio at September-end, compared with less than 0.5% in the corresponding quarter last year.

“Short-term products will come down and more of it will go down to a year-long product,” chairman and managing director V P Nandakumar said at the earnings call.

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The lender will continue offering shorter-tenure loans to borrowers with clearly identifiable short-term requirements, while shifting other customers towards one-year products. The management attributed the increase in delinquencies largely to customers adjusting to unfamiliar repayment schedules.

The company said collections were showing encouraging early trends, with several borrowers making full or partial payments to regularise overdue accounts.

Muthoot Finance reported a sharp increase in standalone stage 2 loans to Rs 23,467 crore at September-end from Rs 1,876 crore in June. Stage 3 assets rose to Rs 7,268 crore from Rs 3,927 crore during the same period, its investor presentation said.

“Since these loans require monthly interest payments, failure to pay can fall into Stage 2 and Stage 3 bucket,” managing director Alexander George said.

He said customers accustomed to one-year bullet repayments were still adjusting to monthly interest-servicing arrangements, requiring greater customer education and collection efforts.