Gold Loans Surge 125%: Why Budget 2026 May Focus On Tier-2, Tier-3 Credit Access

Gold loans are surging in formal finance. Budget 2026 could push safer, cheaper access in Tier-2 and Tier-3 India through distribution, pricing, and compliance tweaks.

Gold-backed credit is returning to the centre of the policy debate as India heads into Budget 2026. In smaller cities and rural belts, households and micro businesses still lean on short-tenure liquidity for working capital, seasonal needs, and emergencies. 

Banking data-based reporting shows loans against gold have expanded sharply, helped by higher gold prices and a cautious stance on unsecured lending. On January 2, 2026, Economic Times reported bank gold loans rose 125% YoY to about ₹3.50 lakh crore by end-November 2025. 

Tier-2 and Tier-3 borrowers benefit from speed. The system needs guardrails and affordable pricing.

The Core Problem: Urban-Rural Divide In “Usable” Credit

Account access has widened, but “usable credit” still breaks by geography. A PIB factsheet dated August 15, 2025 cited the Financial Inclusion Index at 67.0 for the year ending March 2025, signalling progress on access and usage.

Yet, for many in non-metros, formal small-ticket credit remains paperwork-heavy. Gold loans fill this gap because collateral substitutes for documents. The risk is uneven practices, pricing stress, and borrower protection gaps if growth runs ahead of controls.

Why Gold Loans Are Turning Into The Main Story Before Budget 2026?

The growth curve is hard to ignore. On January 2, 2026, Times of India reported gold loans grew 125% YoY by end-November 2025, while overall bank credit grew 11.5%. 

It also reported gold loans contributed 12% of incremental lending up to November 2025, with portfolio accretion of about ₹1.5 lakh crore over the last 12 months. 

Before the Budget levers are discussed, a quick view of the latest published numbers helps.
 

This momentum is also being read as a shift away from unsecured products into secured retail credit in smaller towns. 

What Happened Earlier: Regulation Churn, Ministry Pushback, And Market Expansion?

The run-up started well before 2026. Reuters reported on April 9, 2025 that stricter processes were proposed for gold-backed loans, including tighter collateral controls and a 75% loan-to-value framework in the draft stage.

Then came the government’s intervention on ticket sizes. On May 30, 2025, Economic Times reported the finance ministry backed exemptions for borrowers with gold loans below ₹2 lakh, and suggested delaying implementation to January 1, 2026 in its feedback on the draft. 

Parallelly, ratings commentary turned more bullish. ICRA’s thematic note dated October 8, 2025 projected the organised gold-loan AUM to reach ₹15 trillion in FY2026 and estimated NBFC gold-loan AUM growth at 30%–35% in FY2026. 

Loanjagat, in a December 29, 2025 explainer, also flagged the rapid climb in outstanding gold loans during 2025 and linked it to higher collateral values and borrower demand. 

Stakeholders Are Pushing Different Priorities

Finance ministry feedback has focused on protecting small-ticket borrowers below ₹2 lakh and keeping disbursals fast. Lenders are projecting stronger growth as borrowers shift to secured credit. 

Reuters reported on November 13, 2025 that Muthoot Finance raised its FY2026 gold-loan growth outlook to 30%–35% amid strong demand. 

What Budget 2026 Can Actually Scale: Cost, Reach, And Guardrails?

Budget measures will be judged on whether they expand access without pushing borrowers into repeat rollovers or hidden charges. A practical checklist is emerging.
 

AA rails are already scaling. Economic Times reported on July 30, 2025 that the AA ecosystem facilitated loans worth ₹1.6 lakh crore+ in FY25 across 1.89 crore loan accounts, citing Sahamati.  

Conclusion

Gold loans have turned into a high-volume bridge for non-metro liquidity, backed by hard growth data across 2025 and end-2025. Budget 2026 can scale it further by lowering delivery friction and strengthening borrower protection, so growth stays clean and affordable.