Tata Capital joins the race to own a piece of India's dormant wealth

Tata Capital's decision to buy an 88.6% stake in Kerala-based Yogakshemam Loans Ltd (Yogloans) is a sign of where India's lending industry sees its next growth engine. As unsecured retail credit slows and regulators tighten oversight, lenders are increasingly gravitating towards secured products that offer strong yields with relatively low credit risk. Few segments fit that description better than gold loans. Gold loans are no longer viewed as a niche product concentrated in southern India but as a mainstream retail lending opportunity with national scale. Tata Capital's entry also comes at the time of a radical behavioural shift when Indians, especially Gen Z, no longer attach heavy emotional value to family gold.

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Why Tata Capital is entering gold loans now

For Tata Capital, timing must be important. The company is entering a market that is expanding faster than almost every other retail lending category. Loans against gold jewellery surged 50% to about Rs 19 lakh crore in FY26, making gold loans the fastest-growing retail credit segment in the country. Outstanding gold loans extended by NBFCs alone jumped nearly 70% year-on-year to Rs 3.29 lakh crore by May 2026.


In a hot sector, the acquisition gives Tata Capital an immediate operating platform instead of forcing it to build a gold loan franchise from scratch. Yogloans brings a loan book of about Rs 708 crore, a network of 162 branches across four southern states and roughly 32,000 customers. More importantly, it brings local expertise in a business where customer relationships, branch execution and gold appraisal skills matter as much as capital.

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Gold loans typically generate higher yields than housing finance while carrying lower credit costs than unsecured personal loans. They are short-tenure products, have rapid portfolio turnover and are backed by highly liquid collateral. For a diversified lender like Tata Capital, adding gold loans helps balance the retail portfolio at a time when lenders are becoming more cautious about unsecured credit.

The move also mirrors a wider trend. L&T Finance acquired the gold loan business of Paul Merchants Finance last year. InCred Finance bought TruCap Finance's gold loan business. Bain Capital acquired a significant stake in Manappuram Finance. Capital is flowing into the sector because investors and lenders increasingly see gold loans as one of the most attractive segments in Indian retail finance.

Why gold loans have suddenly become so hot

The simplest explanation is that gold prices have risen sharply. As gold prices climb, the same piece of jewellery can support a larger loan amount. Borrowers therefore need to pledge less gold to raise the same amount of money. For households already sitting on gold jewellery, it becomes one of the easiest sources of liquidity.

But rising gold prices explain only part of the story. The nature of gold borrowing itself has changed. Traditionally, gold loans were viewed as a last-resort product used during financial distress. Today, many borrowers use gold as a temporary liquidity tool. Small businesses, traders, self-employed professionals and even salaried households are increasingly borrowing against gold for working capital, education expenses and short-term cash needs instead of selling the asset.

A generational shift is also reshaping attitudes towards gold. Younger consumers increasingly view gold as a financial asset rather than a family heirloom that must remain untouched. Across India, many Gen Z and millennial consumers are unlocking the value of idle gold to fund major life goals, whether it is buying a home, financing higher education, starting a business or reallocating money into other investments. While previous generations often attached strong sentimental value to inherited jewellery, younger consumers tend to take a more pragmatic view of the metal. That does not necessarily mean they are rushing to sell family gold, but they may be more comfortable using it as collateral when liquidity is needed. For lenders, this shift broadens the potential customer base and reinforces the transition of gold from a dormant store of wealth into an actively used financial asset.

There is another factor at play. As regulators tightened scrutiny of unsecured lending and lenders became more selective about personal loans, secured lending regained favour. Gold loans emerged as a natural beneficiary because they offer quick disbursal, limited documentation and collateral protection.

The numbers show how dramatic the shift has become. According to a recent Experian India report, the share of gold loans in the retail loan portfolio has more than doubled in the past four years, while finance companies have emerged as the fastest-growing lender category, steadily gaining market share. The share of gold loans in overall retail credit sourcing rose steadily from 18% in FY23 to 41% in FY26. “Public sector banks, although still significant contributors, have consistently ceded market share, reflecting increasing competitive pressure from agile NBFC lenders,” the report said.

The sector has become so attractive that gold loans overtook vehicle loans as the largest securitised asset class during the April-June quarter, accounting for nearly one-third of all securitisation volumes. Investors, especially banks, are increasingly willing to buy pools of gold loans because historical credit losses have been negligible.

The relationship between gold prices and gold loans

Gold loan businesses thrive when gold prices rise. Higher prices increase the value of collateral and borrowers gain access to larger loan amounts. This means lenders see faster portfolio growth while asset quality often remains stable because borrowers have greater equity in the pledged jewellery. The effect can be seen in the industry's recent performance. Even though some large gold loan companies reported lower quantities of pledged gold during FY26, their loan books continued expanding because rising gold prices allowed borrowers to obtain larger loans against smaller quantities of jewellery.

But gold prices are a double-edged sword. A sharp correction can quickly change the equation. Local gold prices have already fallen from their January peak, prompting margin calls in parts of the industry. When gold prices decline, the value of collateral falls while the loan amount remains unchanged. This pushes up the loan-to-value (LTV) ratio and increases risk for lenders. The biggest vulnerability lies in bullet repayment loans, where borrowers repay principal and accumulated interest at the end of the tenure. Because the outstanding loan amount does not reduce over time, these products are more exposed to sudden declines in gold prices.

How lenders protect themselves from gold price crashes

At first glance, gold loans may appear highly vulnerable to fluctuations in bullion prices. In practice, however, lenders have built multiple layers of protection. The first safeguard is conservative lending. Although RBI regulations permit LTV ratios of up to 85% for certain categories of borrowers, most lenders typically operate in the 65-75% range. This creates a substantial cushion against price declines.

Another protection comes from continuous monitoring. Gold is marked to market regularly. If prices fall sharply and the LTV ratio breaches internal thresholds, lenders can ask borrowers to either repay part of the loan or pledge additional collateral. These margin calls are similar to practices followed in securities-backed lending. Yet another defence is the short duration of the product. Most gold loans have relatively short tenures, allowing lenders to frequently reassess collateral values and reprice risk. Another important protection is auction efficiency. Gold is one of the most liquid forms of collateral. If borrowers fail to repay, lenders can auction pledged jewellery and recover dues far more quickly than in housing or business loans.

As per a recent Crisil Ratings analysis, around 90% of gold loans are repaid by maturity. Of the remaining unpaid accounts, more than three-fourths are settled before auction. Ultimately, less than 3% of disbursed loans typically end up being recovered through auction. The rating agency's stress analysis found that even after assuming a 20% decline in gold prices and some discount in auction realisations, lenders would still generally recover the principal amount. That explains why gold loans have historically generated negligible credit losses despite periodic volatility in gold prices.

What Tata Capital's entry means for Muthoot and Manappuram

The arrival of a large, well-capitalised institution like Tata Capital will intensify competition for leaders. For years, the organised gold loan market was dominated by specialists such as Muthoot Finance, Manappuram Finance and, to a lesser extent, IIFL Finance. Their competitive advantage came from deep branch networks, local market knowledge and operational expertise. Tata Capital enters with a different set of strengths even though the Yogloans acquisition also gives it the muscle of a specialist lender. It has access to low-cost capital, a trusted brand, strong technology capabilities and an existing retail customer base. The company can potentially cross-sell gold loans to customers already using its personal finance, housing finance and business lending products.

The bigger impact may be on formalisation. Industry executives estimate organised lenders still account for only around 35-40% of India's overall gold loan market, with local financiers, pawn brokers and jewellers controlling a large share. Large entrants such as Tata Capital could accelerate the migration of borrowers from the unorganised sector to regulated lenders.

Competition is likely to intensify not only on pricing but also on customer experience, digital origination and branch expansion. The presence of larger diversified lenders could also help expand the market beyond its traditional strongholds in southern India.

Where is the gold loan sector headed?

The long-term opportunity in the sector remains significant. Indian households are estimated to hold thousands of tonnes of gold, much of it lying idle in the form of jewellery. Gold loans effectively convert that dormant wealth into a source of credit. Few countries offer lenders such a large collateral pool. The growth trajectory also appears favourable. Rising formalisation, greater investor interest, expanding branch networks and stronger regulatory oversight are all supporting the industry's development. The planned IPO of Muthoot and the growing securitisation market indicate that capital markets are increasingly comfortable with the asset class.

The key risk remains a prolonged and severe decline in gold prices. A correction of 10-15% can generally be absorbed through existing buffers. A deeper and sustained fall, especially if accompanied by economic stress among borrowers, would test lenders' risk management systems more aggressively. Fitch Ratings has warned that another major crash in gold prices could increase margin calls, auctions and pressure on profitability.

For now, though, the direction is clear. Gold loans have moved from the margins of Indian finance to the centre of retail lending growth. Tata Capital's entry is not a bet on one company in Kerala but India's vast stock of household gold which will continue to fuel one of the country's fastest-growing credit businesses for years to come especially with the new generation's changing attitude to family gold.