Summary
- Bajaj Finance and Piramal Finance have highlighted emerging risks in India’s fast-growing gold-loan market.
- According to Reuters, bank loans against gold jewellery reached approximately ₹5.6 lakh crore in August 2026, up 83% year-on-year.
- Gold-backed lending by reporting NBFCs reached approximately ₹3.6 lakh crore, up 69%.
- Bajaj Finance’s combined Stage 2 and Stage 3 loan share increased by 15 basis points sequentially. Management attributed much of the increase to short-term gold loans.
- Piramal Finance noted that nearly 35% of its customers had a gold loan with another institution. This does not mean 35% were in default.
- Despite the concerns, both companies reported higher quarterly profits.
- Existing RBI rules establish protections relating to gold valuation, auction procedures, release of pledged jewellery and compensation for certain delays.
Gold Loan Market Faces Early Warning Signs
India’s fast-growing gold-loan market is attracting greater scrutiny after two major non-banking financial companies highlighted emerging repayment risks among borrowers.
Bajaj Finance and Piramal Finance raised concerns in connection with their September-quarter earnings discussions.
The development was reported by Reuters on Wednesday, 21 October 2026.
Loans against gold have expanded rapidly as households and businesses seek credit using jewellery and other eligible gold collateral.
For borrowers, such loans may provide access to funds without selling valuable family assets.
For lenders, pledged gold offers collateral that may reduce credit losses when borrowers cannot repay.
However, collateral does not eliminate repayment risk.
The latest warnings concern early stress signals—not an announcement that India’s gold-loan market is facing a widespread default crisis.
Gold Loan Growth in India: Key Figures
| Indicator | August 2026 | Year-on-year growth |
|---|---|---|
| Bank loans against gold jewellery | ₹5.6 lakh crore | 83% |
| NBFC gold-backed credit | ₹3.6 lakh crore | 69% |
| Bajaj Finance gold-loan portfolio | Approximately ₹24,000 crore | Not established in this report |
| Bajaj Finance Stage 2 + Stage 3 share | Increased 15 basis points quarter-on-quarter | Portfolio-wide measure |
Source: Reuters, citing RBI credit datasets and lender disclosures.
The bank and NBFC figures come from different reporting populations. They should not automatically be combined and described as the exact total size of India’s gold-loan market.
RBI’s bank-credit release dated 30 September and its NBFC-credit release dated 6 October provide the underlying official reporting framework.
Why Are Gold Loans Growing So Quickly?
Gold jewellery occupies an important place in household savings across India.
Borrowers may use jewellery as collateral to meet medical expenses, education costs, agricultural requirements, working-capital needs or other short-term obligations.
The loan amount depends on factors such as the gold’s assessed purity, weight, valuation and the lender’s applicable loan-to-value limit.
The borrower retains ownership of the pledged jewellery, subject to the lender’s security rights under the loan agreement.
The growing gold-loan market reflects both borrower demand and lender willingness to extend secured credit.
However, rapid growth can create risks if repayment capacity is not assessed carefully.
A lender may be protected by collateral, but borrowers can still face interest costs, overdue charges and the potential loss of pledged jewellery if the loan is not repaid.
What Did Bajaj Finance Report?
Bajaj Finance reported an increase in the combined share of assets classified under Stage 2 and Stage 3 during the September 2026 quarter.
The proportion rose by 15 basis points compared with the previous quarter.
A basis point equals one-hundredth of a percentage point. Therefore, 15 basis points means 0.15 percentage points.
Management indicated that much of the deterioration was associated with short-tenor gold-loan products.
According to Reuters, the company has stopped offering those particular short-term gold loans.
That is not the same as saying Bajaj Finance has discontinued all gold lending.
Its reported gold-loan portfolio was approximately ₹24,000 crore.
What Are Stage 2 and Stage 3 Loans?
Under applicable financial reporting standards, Stage 2 generally refers to financial assets with a significant increase in credit risk, while Stage 3 relates to credit-impaired assets.
Overdue payments can be an important indicator in these classifications.
However, an increase in Stage 2 and Stage 3 assets should not be presented as proof that all those borrowers have defaulted or that all the deterioration originated in gold loans.
The 15-basis-point figure concerns Bajaj Finance’s combined portfolio classification indicator.
The company specifically identified short-term gold lending as a major contributor.
What Did Piramal Finance Say?
Piramal Finance also raised concerns about the rapid expansion of loans against gold.
During its earnings discussion, chief executive Jairam Sridharan said that nearly 35% of its customers had a gold loan from another institution.
This figure points to the presence of overlapping borrowing relationships.
It does not mean that 35% of Piramal’s customers had overdue gold loans.
Management also referred to broader industry lending to borrowers with existing overdue obligations elsewhere.
The concern is that some households may be using additional borrowing to manage earlier repayment commitments.
Nevertheless, a customer having more than one loan is not automatically evidence of financial distress.
The main issue is whether the borrower’s income and cash flows are sufficient to service all outstanding obligations.
Did Bajaj Finance and Piramal Report Losses?
No.
Both companies reported substantial profits for the September quarter.
Bajaj Finance reported consolidated profit after tax of approximately ₹6,367 crore, representing around 29% year-on-year growth.
Piramal Finance reported consolidated profit of approximately ₹545 crore, up around 67%.
These results show that the companies remained profitable despite the warning signs.
A lender can report strong earnings while identifying emerging risks in individual loan products.
Investors should therefore evaluate profitability alongside asset quality, provisioning, loan growth and funding costs.
How Can Gold-Loan Repayment Stress Affect Borrowers?
Gold loans are secured by pledged jewellery or other eligible collateral.
If borrowers fall behind on repayments, interest and applicable charges may increase the amount owed.
Depending on the loan agreement and regulatory requirements, serious non-payment can eventually lead to enforcement of the lender’s security rights.
That may include auctioning the pledged gold after following the prescribed process.
Read Also: RBI Repo Rate Hike: How 25 Bps Increase Affects Home Loan EMI
Borrowers should not assume that an increase in the market price of gold automatically protects them from such consequences.
Nor should they assume that the lender will indefinitely extend the repayment period.
Read Also:
The Danger of Repeated Borrowing
A household may face additional repayment pressure if it takes a second loan to settle an earlier loan.
This can become difficult when regular income is insufficient to cover interest and principal obligations.
Before refinancing a gold loan, borrowers should calculate the total outstanding amount, new interest cost, fees and final repayment date.
Using fresh borrowing to repay older borrowing without a sustainable plan can increase financial pressure.
What Do RBI Gold-Loan Rules Say?
The Reserve Bank of India issued its consolidated Lending Against Gold and Silver Collateral Directions, 2025.
Regulated lenders were required to comply with the framework no later than 1 April 2026.
These are existing directions, not a new rule announced on 21 October.
The framework covers eligible banks, cooperative banks and NBFCs, subject to its scope and conditions.
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Loan-to-Value Limits
For consumption loans against eligible gold and silver collateral, the RBI framework prescribes these maximum loan-to-value ratios:
| Total consumption loan amount per borrower | Maximum LTV |
|---|---|
| Up to ₹2.5 lakh | 85% |
| Above ₹2.5 lakh and up to ₹5 lakh | 80% |
| Above ₹5 lakh | 75% |
These ceilings apply to the specified consumption-loan category. They should not be presented as identical terms for every agricultural or income-generating loan.
The actual eligible loan amount also depends on collateral valuation and the lender’s assessment.
How Is Pledged Gold Valued?
RBI’s directions specify that eligible collateral is valued with reference to its purity and prescribed market-price methodology.
The intrinsic metal value is relevant.
The value of gemstones and other non-gold materials is excluded from the eligible gold valuation.
Borrowers should request the prescribed collateral-assessment certificate and verify the recorded purity, gross weight and net gold weight.
When Must a Lender Return the Jewellery?
RBI’s directions provide that pledged collateral should be released or returned on the same day after full repayment or settlement, and in any case within a maximum of seven working days.
Where a delay beyond the prescribed period is attributable to the lender, compensation of ₹5,000 per day is specified.
Borrowers should retain their repayment confirmation and request written acknowledgement when closing the account.
These protections are subject to the conditions of the applicable RBI directions.
Can a Lender Auction the Gold Without Warning?
RBI’s framework includes requirements relating to notice, transparency and auction procedures.
Lenders must provide the prescribed opportunity for borrowers to repay or settle their dues before initiating an auction.
After an auction, the lender must provide details of the proceeds and the amounts adjusted against the debt.
Any surplus from auction proceeds must be returned in accordance with the applicable timelines.
However, borrowers should not ignore repayment notices.
The existence of procedural protections does not remove the contractual obligation to repay the loan.
What Should Gold-Loan Customers Check?
Before accepting a gold loan, a borrower should understand the interest rate, processing charges, repayment method, maturity date and consequences of default.
The Key Fact Statement and loan agreement should identify the applicable charges.
It is also important to verify the assessed gold weight, purity and valuation.
Borrowers with existing loans should review upcoming payment dates and contact the lender promptly if repayment becomes difficult.
Any extension or restructuring should be agreed formally rather than assumed.
If the jewellery has sentimental importance, losing it through enforcement may have consequences beyond its financial value.
What Should Investors Monitor?
For shareholders in gold-financing companies, loan-book growth alone is not sufficient to evaluate business performance.
Important indicators include overdue loans, Stage 2 and Stage 3 classifications, gross and net non-performing assets, credit costs, provisioning coverage and loan-to-value exposure.
Investors should also examine whether lending growth is concentrated in short-tenor products or customers with multiple borrowing relationships.
A strong quarter’s profit does not guarantee future asset-quality performance.
Similarly, early signs of stress do not prove that an institution faces imminent financial difficulty.
Conclusion
India’s gold-loan market has experienced rapid expansion, supported by demand from consumers and businesses.
Bajaj Finance and Piramal Finance have now highlighted selected repayment-risk indicators, making asset quality an important issue to monitor.
The latest development calls for greater attention to responsible borrowing and prudent lending rather than speculation about an industry-wide crisis.
For borrowers, the key lesson is to understand repayment obligations and protect pledged jewellery. For investors, the priority is to evaluate credit quality alongside lending growth and reported profits.
Editorial Sources
- Reuters — Gold Loan Stress Report, 21 October 2026
- RBI — Sectoral Deployment of Bank Credit, August 2026
- RBI — Sectoral Deployment of NBFC Credit, August 2026
- RBI — Lending Against Gold and Silver Collateral Directions
- Bajaj Finance — Investor Relations
Disclaimer: This article was prepared with AI assistance using RBI publications, company disclosure information and attributed financial reporting. It is for educational and informational purposes only, not personal lending, investment, tax or legal advice. Readers should verify the latest lending terms and official regulations. EduTaxTuber disclaims liability for losses to the extent permitted by applicable Indian law.
Disclaimer: EduTaxTuber provides content for general educational and informational purposes only. While we make reasonable efforts to keep the information accurate and updated, laws, regulations, market conditions, software features, and other information may change. Some content may be created or assisted by AI tools and may contain errors or omissions. Readers should verify important information with official sources or qualified professionals before making any tax, legal, financial, investment, business, or other decisions. EduTaxTuber does not guarantee the completeness or accuracy of the information and does not provide professional advice.
