Taking a gold loan? Key costs, repayment rules, and risks to check before pledging jewellery

For years, Indians have relied on a tried-and-tested strategy to handle financial crises. By hoarding jewellery and tapping gold’s potential, they have tackled emergencies ranging from medical needs and job losses to kids’ weddings and business upheavals. Now, this potential is booming, with gold loans growing faster than other retail loan segments, according to Reserve Bank of India (RBI) data.

While loans against gold jewellery by banks surged 88.1% year-on-year in July 2026, those by non-banking finan cial companies (NBFCs) shot up 68.5% y-o-y. Compare this with retail loans (combined) for NBFCs, which grew by only 21.4% y-o-y in July 2026, and bank personal loans (combined), which increased by a mere 16.2%. “Our standalone gold loan assets under management (AUM) grew 50% y-o-y to `1.54 trillion in 2025-26, the fastest pace we have seen in the last five years. Growth has clearly accelerated: it was roughly 8% in 2022-23, 18% in 2023-24, 41% in 2024-25, and 50% in 2025-26,” says George Alexander Muthoot, MD, Muthoot Finance.

“Many players have seen an average increase of 50%, and some have even registered a growth of 100-150% in a year. Their AUMs have increased, but the tonnage growth has not been considerable,” says financial consultant and gold loan expert Pravin Salian.


This rapid rise is driven by sev eral factors. “The gold loan portfolio outstanding reached Rs.22.7 trillion in August 2026, driven by rising gold prices, strong collateral values, repeat borrowing, increasing credit demand, and the continued appeal of gold loans as a quick and accessible source of secured funding,” says Sachin Seth, Regional Managing Director, CRIF India and South Asia.

Gold lending has more than doubled since 2024

Sources: RBI, NHB. Since May 2024, a bank has changed the classification of a category of agricultural loan into ‘loans against gold jewellery’ under retail segment. With effect from 31 December 2025, definition of last reporting fortnight has been changed to the last day of the month under the Banking Laws (Amendment) Act 2025. Hence, y-o-y growth rates from December 2025 onwards are based on end-of month data for the current year and data for the last reporting fortnight for the corresponding month of the previous year.

REASONS FOR GROWTH

As social stigma over debt diminishes, gold jewellery is being increasingly viewed as an idle asset that can be put to work to tide over small and short-term cash-flow needs. “However, the primary driver for loan growth is price rise, not new customers. Though several borrowers have moved from unsecured to secured gold loans, many have also moved out to the unorganised sector,” says Salian.

Rising gold prices: With gold prices nearly doubling from Rs.74,152 per 10 grams in September 2024 to Rs.1,51,687 in September 2026, as per Bloomberg, more and more people are realising that they can raise a bigger loan against the same quantity of gold than they could earlier. “Domestic gold prices rose around 59% y-o-y in the second quarter of 2026, and the average gold loan has gone up from about Rs.1 lakh in 2023-24 to roughly Rs.1.7 lakh in 2025-26,” says Ritesh Srivastava, Founder & CEO, FREED.

ALSO READ | Gold loans are no longer just for rainy days: Experian India's Manish Jain on why demand is rising

Tighter norms for unsecured debt: Gold loans are also being viewed as a safer replacement for unsecured loans after the RBI tightened norms in 2023. The risk weight on consumer credit exposures was raised from 100% to 125% (higher risk weight means lenders have to commit more capital against these loans), while for credit-card receivables, it was raised to 125% for scheduled commercial banks, and for NBFCs, to 150%.

However, this rise excluded housing, education, vehicle loans and those secured by gold and gold jewellery. As a result, lenders became more cautious about unsecured personal lending, making secured gold loans more attractive.

“We are seeing a much stronger momentum in gold loans relative to personal loans, with the gold-loan originations growing 39% y-o-y by volume and 108% by value, in the quarter ended March 2026, compared with 26% growth in volume and 32% in value for personal loans. The difference is also visible in outstanding balances, with the gold loan balances growing 55% y-o-y as of March 2026, compared with 12% for personal loans,” says Bhavesh Jain, MD & CEO, TransUnion CIBIL.

Low cost, easy access: Compared to personal loans, gold loans are cheaper— usually 8.5% to mid-20% per annum, compared to 10-30% for personal loans. These are also disbursed faster because gold jew ellery acts as collateral, requiring much less scrutiny. “This is one of the reasons gold loans are so accessible to a wide cross-section of borrowers. We do not require a minimum credit score or proof of income for standard gold loan approval; only basic identity and address documents are needed, since the strength of the collateral matters far more than the applicant’s credit history,” says Muthoot. However, where a credit score is available, it can still influence the rate offered; customers with stronger scores may get more favourable terms.

“Gold loans typically cost far less than a personal loan or a credit card, do not demand a long credit history, and for smaller amounts, these can be disbursed the same day. For loans up to Rs.2.5 lakh, the RBI removed the requirement for detailed income assessment and formal credit checks. Above Rs.2.5 lakh, a full credit appraisal including repayment capacity is still required,” says Srivastava.

LTV: Loan-to-value (LTV) ratio decides the percentage of gold’s value that you can secure as a loan. In June 2025, the RBI announced a tiered LTV ratio of up to 85% for gold loan, meaning borrowers can now secure a bigger loan for the same quantity of gold. “Since 1 April 2026, all regulated lenders have replaced the earlier flat 75% ceiling that was applied regardless of the loan size,” says Muthoot. This means loans of up to Rs.2.5 lakh can go up to 85% LTV, those between Rs.2.5 lakh and Rs.5 lakh up to 80%, and loans above Rs.5 lakh remain at 75%.

Borrower profile: Gold loans are no longer only a rainy-day loan, resulting in a slight shift in borrower profile. “You would think gold loan is usually taken by the middle class and older people, but we are seeing younger population take gold loans because they are viewing it as a financial instrument, rather than an asset being pledged,” says Manish Jain, Country Managing Director, Experian India.

Bhavesh Jain differs somewhat. “The borrower profile has broadened over the past few years, though the age mix has remained relatively stable. In 2025, borrowers below 30 accounted for 19% of gold-loan originations; the 30-40 age group remained the largest cohort at 36%; those aged 40-50 accounted for 26%; and those above 50 made up 19%. These proportions are broadly similar to 2022, indicating that the change in the borrower base is being driven more by credit profile, gender and geography than by age,” says Jain.

Adds CRIF’s Seth: “The demographic profile of gold loan borrowers is gradually evolving, with women increasing their share of portfolio outstanding from 40.5% in August 2021 to 42.3% in August 2026. Borrowers aged 31-50 account for nearly 60% of the portfolio, while the share of ‘very low risk’ and ‘low risk’ customers has risen from 41% to 48.6%, indicating improving credit quality and wider adoption among financially stable borrowers.”

What is driving the loan boom?

Gold prices

The sharp increase in gold prices in the past two years means that the same quantity of gold can now fetch a bigger loan, and people are beginning to put their jewellery to work.

Tighter norms

New regulations have cut the availability of easy, unsecured credit, and borrowers are using gold to fund immediate needs. Lenders have also expanded secured gold loan portfolios.

LTV ratios

The increase in loan-to-value ratio cap from 75% to 85% for gold loans up to Rs.2.5 lakh from 1 April 2026 translates to a bigger loan for the same quantity of gold.

Faster processing

Since gold is used as collateral, there’s no need for income and credit score scrutiny, making the process of disbursing loans faster.

Lower cost

Gold loans are usually priced lower due to lower risk compared to personal loans, making them more attractive for borrowers.

Social stigma

Gold loans are no longer seen as a last resort to deal with financial emergencies, but as an idle asset that can be put to work by middle class and rich, young and old.

Gold loan scores over personal loan

BEFORE YOU TAKE A GOLD LOAN…

It’s best to opt for a gold loan if you are look ing for short-term emergency funds that you can repay easily. However, if you treat it as a long-term or an ongoing source of repaying other loans, it can pose a high risk.

Total cost: Though a gold loan is relatively cheap, one must consider the complete cost. “Add processing fees, valuation charges, renewal charges, and foreclosure charges. Gold loans usually win on cost against unsecured credit, often by a wide margin, but compare the whole picture,” says Srivastava. “Borrowers should compare the total borrowing cost, repayment schedule, tenure, applicable charges and consequences of default, not just the interest rate,” says Anurag Mehra, Co-founder & Director, Expert Panel.

Emotional loss: Remember that you are pledging your jewellery and if you are unable to repay, you may lose it. “Pledged gold is not merely a financial asset; for many families it has emotional and inter-generational value. Failure to repay can ultimately lead to auction of that collateral,” says Seth.

Repayment: Choosing the repayment structure is crucial. Gold loans are usually repaid either in instalments or through the bullet structure. Both structures typically carry the same headline rate on a given scheme, so the real difference comes from how interest accrues over time.

“With EMI repayment, the principal reduces with each instalment, so interest is charged on a shrinking balance and the total interest paid over the year is lower. With bullet repayment, the principal remains untouched till the end of tenure, so interest builds up on the entire original amount throughout,” explains Muthoot. “Consider whether the repayment structure fits how you earn. If you have a steady salary, choose instalments; if you have a lumpy income, bullet can work, but pair it with a monthly savings habit,” says Srivastava.

Repeated renewals: The bulk of gold loans are taken by repeat borrowers, and only a small percentage are new customers. “Of the total value we disbursed across fresh loans, renewals and top-ups this year, around a fifth went to new customers, which implies roughly 80% of disbursement value came from existing relationships,” says Muthoot.

Remember, if you repeatedly take top-ups or renew the gold loan without repaying the principal, it can pose a big risk, creating a cycle of dependence on debt. Every roll-over adds cost and keeps your gold at risk for longer.

Affordability: A serious mistake is pledging jewellery to repay an already unaffordable debt (older loans or credit card dues) without addressing the underlying mismatch between income and expenditure.

“This puts a family asset at risk without resolving the original problem,” says Mehra. “Our concern is greater where income has fallen, earn ings are irregular, or existing repayments leave little money for essential household expenses. If the only repayment plan is another loan or a top-up, the household is in a vulnerable position,” he adds.

Taking the maximum loan available can also be risky. “If your gold supports Rs.85,000 and you take it all, you have no cushion. If gold prices dip, you can be asked to either pledge more gold or repay part of the loan, at the worst possible time,” warns Srivastava.