In a written reply to the Lok Sabha on July 21, 2025, the Ministry of Finance revealed that the total value of loans against gold jumped sharply from ₹1.16 lakh crore in May 2024 to ₹2.51 lakh crore in May 2025. That was a 115% increase within a year.

And the recent jump of 124% YoY is yet another clue towards the changing behaviour of the borrowers.

Year-on-Year Rise in Gold Loans Outstanding

Month & Year	Value of Gold Loans Outstanding (₹ crore)	Growth Rate (%)
May 2024	1,16,777	-
May 2025	2,51,369	115.2

This article decodes the sudden shift towards gold-backed loans, RBI data supporting this case, and the factors responsible for this shift. So, for anyone planning to borrow a gold loan, this article is a gold mine.

Read More – Personal Loan Volumes Surge in FY 2025, But Year-on-Year Growth Slows: Report

Latest Update 2025: Gold-Backed Loans Rise by 123.8% Since 2024

According to RBI data, as of June 27, 2025, bank credit extended against gold jewellery reached ₹2.77 lakh crore, up from ₹1.24 lakh crore on June 28, 2024 and ₹2.09 lakh crore on March 21, 2024.

Growth of Gold-Backed Loans vs. Other Personal Loans

Period	Gold-Backed Loans (₹ crore)	Growth (%)	Personal Loans Growth (%)
June 28, 2024	1,24,000	-	-
March 21, 2024	2,09,000	-	-
June 27, 2025	2,77,000	123.8	14.7

This 123.8% year-on-year growth is far higher than the broader personal loans segment, which grew only 14.7% over the same period. Among all categories, vehicle loans, credit card debt, consumer durable loans, and gold loans recorded the fastest growth in June 2025.

Why Is There a Rise in Gold-Backed Loans in 2025?

Several factors explain this remarkable growth:

Lower Interest Rates on Collateralised Loans
Gold loans typically carry interest rates between 8–12%, much lower than personal loans (10–18%) or credit cards (30–42% APR). For borrowers, this difference can translate into significant savings over the loan tenure.
High Cost of Credit Cards
Rising credit card interest rates have driven borrowers towards secured credit options like gold loans and home loans, which are cheaper and easier to repay.
No Income Proof for Small Loans
Under RBI’s new rules, loans under ₹2.5 lakh no longer require income proof or credit history checks. This move benefits rural borrowers, micro-entrepreneurs, and the informal workforce.
Increased Loan-to-Value (LTV) Ratio
The RBI now allows up to 85% LTV for loans below ₹2 lakh (earlier 75%), giving borrowers higher cash value for the same gold pledged.
Recent Regulatory Changes
RBI’s 2025 gold loan guidelines have made borrowing simpler, safer, and more transparent (explained in the next section).

If you want to look at more factors influencing this high demand, then read this article.

Change in RBI Guidelines After Supreme Court’s Verdict on West Bengal Businessman Case

In June 2025, the RBI rolled out 8 key changes to gold loan rules, largely prompted by borrower complaints and a landmark Supreme Court verdict.

Key highlights from the updated guidelines:

Rule Change	Previous Rule	New Rule (2025)
Higher LTV	75%	85% for loans < ₹2 lakh
Income Proof	Required for most loans	Not required for loans < ₹2.5 lakh
Bullet Repayment	Flexible	Max tenure 12 months
Gold Return Timeline	No fixed deadline	Must return within 7 working days after repayment
Compensation	Not clearly defined	Market value compensation if gold lost/damaged
Auction Process	Bank discretion	Transparent, reserve price ≥90% of market value
Language	Mostly English/Hindi	Mandatory in local languages
Limits	None	Gold: 1kg, Silver: 10kg (with coin caps)

To gain more clarity about the whereabouts of the case and the Supreme Court’s verdict, read this article,

Supreme Court Ruling Strengthens Borrower Protection

The Supreme Court case involved a West Bengal businessman who had pledged 254 grams of gold for a ₹7.7 lakh loan from Bank of India. After he repaid the loan in full by March 31, 2023, the bank revalued the gold, charged ₹1,500 valuation fees, and auctioned his ornaments—without his consent.

The court ruled:

Once a loan is fully repaid, banks cannot revalue or auction pledged gold.
Any surplus from auctions must be returned to the borrower within 7 working days.
Banks delaying the return of gold will face ₹5,000/day penalty.

This ruling reinforced the RBI’s borrower-first approach and set a legal precedent to prevent future exploitation.

Also Read - Gold Loan vs. Personal Loan in 2025: Which One is Cheaper for Emergency Funds?

Broader Credit Trends: Personal Loans, Agriculture, Industry, and Services

While gold loans surged, other segments showed slower growth:

Personal loans: Growth slowed to 14.7% from 16.6% a year ago, mainly due to moderation in vehicle loans, credit cards, and other personal loans.
Agriculture and allied activities: Growth dropped to 6.8% from 17.4% last year.
Industry: Overall growth at 5.5% (down from 7.7%), though micro, small, and medium industries continued steady expansion.
Services: Growth fell to 9.6% from 15.1%, mainly due to reduced lending to NBFCs. However, credit to computer software and professional services remained strong.

Conclusion

The 124% surge in gold loan growth signals both a financial adaptation by households and the growing appeal of secured, low-cost credit. RBI’s updated rules, especially the 85% LTV ratio, no-income-proof requirement, and strict gold return deadlines—have made gold loans more attractive and borrower-friendly.

However, the Supreme Court’s recent ruling is a reminder that trust and transparency remain critical in financial dealings. As India’s economy navigates uncertain conditions, gold loans may continue to be the fastest-growing personal loan segment, but strong regulation will be essential to protect the very borrowers it seeks to empower.

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