India Gold Loan Defaults Rise as Large Borrowers Face Higher Credit Risk in 2026

Key Takeaways 

• Defaults among gold loan borrowers with over  ₹2,50,000 in outstanding loans are rising fast, with a delinquency rate 2.2 times higher than that of smaller borrowers.

• Gold loans made up just 5.9% of India’s retail credit portfolio in March 2022. That share has now jumped to 11.1% by December 2025, which signals how quickly this market has grown and how much more is now at risk.

Gold Loans Are Growing Fast, and So is the Risk

India's gold loan market has become the second-largest retail credit segment in the country. The gold loan portfolio has expanded 3.8 times since March 2022, which makes it one of the fastest-growing segments in retail lending. But alongside this growth, defaults are rising, especially among those who owe larger amounts.

In April 2024, gold loans from banks stood at ₹1.01 lakh crore. By October 2025, that number had jumped to Rs 3.37 lakh crore. The fast growth is now worrying both lenders and regulators. If gold prices fall further, borrowers may struggle to repay, and banks could face bigger problems than expected.

Who Is Getting Hurt and What It Means for Common Borrowers?

The defaults are not spread evenly. Here is how default risk increases sharply with loan size and number of loans, based on TransUnion CIBIL data:
 

This matters for everyday borrowers, too. Borrowers with a history of serious default who then rely on gold loans face a significantly higher risk of being shut out of the formal credit system entirely. 

Their credit-access closure rate is around 1.6 times higher than that of non-defaulting borrowers. This suggests that gold loans may increasingly be functioning as a product of last resort for some. Once someone exits the formal credit system, getting back in becomes very hard.

What Experts Are Saying and What Needs to Change?

Bhavesh Jain, MD and CEO of TransUnion CIBIL, has been direct about the risks. “Collateral strength remains important, but it cannot be the sole criterion for evaluating borrowers. Lenders will need to assess total borrower indebtedness, repayment capacity, recent credit behaviour, and cross-lender exposure more holistically,” he said.

Lenders are now advised to evaluate borrowers on three key factors beyond just the gold pledged:

• Total debt the borrower already carries across all loans.
• Repayment capacity, not just gold value.
• Recent credit behaviour and cross-lender exposure.

Ashwani Rana, banking expert and founder of Voice of Banking, warned that global uncertainty and geopolitical tensions are causing sharp fluctuations in gold prices. 

If gold prices fall by 10 to 15%, the value of pledged jewellery could fall below the outstanding loan amount, pushing borrowers toward default. In response, the Reserve Bank of India released its final circular on gold loans in June 2025. It introduced tiered LTV limits, stricter bullet repayment rules, and better borrower protections to ensure more disciplined growth.

Conclusion

India’s gold loan market is not broken, but it is under pressure. Fast growth, bigger loans, and more high-risk borrowers are creating some risks. The data from TransUnion CIBIL shows that lenders cannot depend only on gold as security anymore.

Banks need better checks, careful lending, and strong rules to make sure the market grows safely and avoids bigger problems in the future.