Are Gold Loans Becoming Too Risky for Indian Borrowers?

Key Takeaways 

• TransUnion CIBIL's Gold Loan Landscape Report (April 2026) reveals that borrowers with gold loan exposure above ₹2,50,000 are 2.2 times more likely to default than those with lower exposure. The increasing loan sizes and repeat borrowing are pushing up credit risk across the segment.
   
• Gold loans have grown 3.8 times since March 2022 and are now India’s second-largest retail loan. The focus was on growth earlier, but now there are signs that some borrowers have taken on too much debt, which is becoming a concern.

In 2025, nearly 74% of gold loan borrowers already had over ₹1,00,000 in outstanding debt when they took a new gold loan. This means borrowers are not using gold loans to replace other debt. They are stacking them on top. Here is how the numbers have shifted over 3 years:

What does this mean for Millions of Indian Borrowers?

Gold loans are no longer just a tool for farmers or small traders in a cash crunch. The segment is drawing more borrowers with stronger credit profiles, larger ticket sizes, and repeat usage. This indicates that gold loans are no longer being used only for short-term liquidity needs but are becoming part of broader household borrowing behaviour.

Read More - Bad News For Gold Loan Borrowers

But this change also has a downside. 46% of highly indebted borrowers also have more than 5 loans, which significantly raises their default risk. A default does not just mean losing money for ordinary families who have pledged their household gold to manage expenses or other EMIs. It means losing the gold itself, often the only significant asset they own. The delinquency data make this risk very clear:

Delinquency rates by borrower exposure (H1 2025):

• Overall delinquency: 1.1%
• Borrowers with exposure below ₹2,50,000: 0.7%
• Borrowers with exposure above ₹2,50,000: 1.5% (2.2 times higher)

What Experts Say, and What Lenders Must Do Now?

Bhavesh Jain, MD and CEO of TransUnion CIBIL, says lenders need to change how they judge borrowers. Gold is important, but it should not be the only factor. The lenders should also check how much total debt a person has, their ability to repay, their recent credit behaviour, and loans taken from other lenders.

In simple terms, having gold does not mean a person can repay a loan. According to TransUnion CIBIL, lenders should:

• Check total debt, not just the value of gold
• Look at repayment ability and recent credit history
• Track loans taken from different lenders
• Charge higher interest for risky borrowers
• Be stricter with loan limits based on borrower risk

The report also says some stressed borrowers are using gold loans as a last option. These are people who have already defaulted on other loans and are now turning to gold to get money.

Conclusion 

India’s gold loan market is not in crisis, but it is at a turning point. The growth is strong, but risk is also rising. Lenders need to check if borrowers can repay, not just rely on gold. Borrowers should take loans with a structured repayment plan, not just depend on gold prices staying high.