Banks Cut Down On Gold Loans As Prices Keep Swinging, Says Muthoot Finance

Gold prices keep jumping. Banks are now tightening their grip on gold loans and looking elsewhere for safer lending.

When gold prices move every other week, it makes lenders nervous. In 2025, Muthoot Finance said banks were reducing gold loan limits and disbursals because of constant price changes.

The LoansJagat report (June 2025) showed India’s gold loan value rising to ₹2.77 lakh crore, almost double from ₹1.24 lakh crore in 2024. Big jump, but risky territory too.

The RBI Financial Stability Report (July 2025) mentioned that non-bank lenders reported ₹4,470 crore in bad gold loans, up from ₹3,634 crore a year earlier. For lenders, that’s a warning sign. Price drops mean collateral loses value, and recovery becomes harder. So, they’re slowing down a bit. Feels like the right call for now.

Is Corporate Lending Becoming The New Priority For Banks?

While gold loans cool off, corporate loan growth in Indian banks has picked up again. The RBI Credit Deployment Report for Q1 FY 2025-26 shows corporate lending up 12.8 percent year on year. Retail and farm loans also grew at a steady pace.
 

The trend is clear. Banks are shifting to bigger, more stable borrowers. It’s also part of a larger pattern in banking sector loan growth trends 2025 where safer credit is preferred over quick profit products like gold loans. Sometimes slow is better.

Why Are HDFC And Axis Bank Lending More To Corporates Now?

A HDFC and Axis Bank lending revival report (April 2025) showed both banks lifting corporate credit by 10–15 percent. Their filings with SEBI also showed gold loan growth almost flat. That tells a story.
 

These numbers say enough. The increase in corporate credit after slow quarters is helping private banks regain steady growth. Safer, long-term loans are getting more space on the books. That’s how cycles change quietly.

Has The Focus Completely Shifted Away From Gold Loans?

Public lenders too are catching up. The Ministry of Finance report (May 2025) said state-owned banks made up around 59 percent of new credit in the last two quarters. But they’re still careful with gold loans. Many remember what happened in 2013 when gold prices crashed 25 percent in one quarter and small banks lost money at auctions. Nobody wants a repeat.

The Department of Financial Services (March 2025) suggested keeping gold loans below ₹2 lakh under lighter rules to support rural borrowers. Still, large-ticket gold loans stay tightly monitored. It shows how public sector banks are driving credit recovery but keeping risk under check.

Earlier, reports like LiveMint’s market update had shown gold loans powering NBFC growth. Now the tone is different. Growth has shifted to infrastructure, energy and trade finance. Gold remains important, but it’s not the hero anymore.

Conclusion 

Borrowers may wait for prices to settle before pledging jewellery again. Banks, on the other hand, will keep leaning toward business and industry loans. The mood across lenders is quiet caution. 

The numbers tell the same thing: credit is growing, but in a safer direction. Maybe that’s how banking works best, slow, steady, and a bit wiser this time.
 

Apply for Loans Fast and Hassle-Free

Apply Now

About the Author

LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.