PSU Banks Strengthen Hold on Gold Loan Market: Report

Public sector banks are tightening their grip on India’s gold loan market even as non-banking financial companies (NBFCs) continue to drive overall volume growth, according to a report by CRIF High Mark.

The report indicates that PSU banks have increased their market share in terms of portfolio value, leveraging competitive interest rates and extensive branch networks. At the same time, NBFCs remain dominant in disbursement volumes, particularly in semi-urban and rural areas where turnaround time and flexible lending processes are critical.

Gold loans have witnessed sustained demand amid rising gold prices and tightening liquidity conditions. Borrowers are increasingly using gold-backed credit as a short-term funding solution for business needs, consumption and emergency requirements. The secured nature of gold loans and relatively lower risk exposure have made the segment attractive for lenders.

PSU banks have strengthened underwriting standards and digital processing capabilities to capture a larger share of the market. NBFCs, meanwhile, continue to focus on rapid loan processing and customer convenience to retain competitive advantage.

The report highlights that regulatory oversight and prudent loan-to-value (LTV) norms remain central to maintaining portfolio quality. Authorities have previously cautioned lenders to ensure responsible lending practices in the gold loan segment to avoid overexposure and asset quality concerns.

With gold prices remaining elevated and credit demand resilient, the gold loan market is expected to remain a significant contributor to retail lending growth. The evolving dynamics between banks and NBFCs reflect increasing competition and strategic repositioning within this secured lending segment.

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