According to The Economic Times, in the December quarter, CSB Bank led the pack with gold loans comprising a striking 51% of its total loan mix, followed by Karur Vysya Bank at nearly 29%, City Union Bank at 28%, and South Indian Bank at 22.5%. PSU banks also maintained significant exposure, with Indian Bank and Canara Bank in double-digits. As reported by The Economic Times, banks with sizeable gold loan portfolios are benefiting from strong growth backed by a sharp jump in gold prices, with select lenders seeing their gold loan books surge even as the underlying tonnage declined year-on-year. According to The Economic Times, Majority of lenders resorted to increased exposure in gold loan financing, which was a more secured form of lending alternative supporting lower pressure on capital adequacy.
As reported by The Economic Times, gold prices have surged dramatically from approximately $1,236 per ounce in February 2016 to $4,931.8 per ounce by February 16, 2026 - nearly a fourfold increase over the decade. The steepest rally occurred in just the last two years, with prices more than doubling from $2,034 per ounce in February 2024. According to The Economic Times, this transformation has transformed gold loans from a niche, regionally concentrated product into one of the fastest-growing segments in Indian retail credit, with gold loans growing approximately 128% year-on-year, outpacing overall credit growth significantly. Hemant Sagare, Director of Ratings at Brickwork Ratings, told ET Markets that "The rise in gold prices has been phenomenal over the past 10 years."
According to The Economic Times, loan-to-value ratios have improved quarter-on-quarter, suggesting banks have remained reasonably conservative in their underwriting despite rising prices doing much of the heavy lifting. Select banks have strategically converted their gold loan portfolios from floating to fixed rates, aiding net interest margin protection in the current falling rate cycle. As reported by The Economic Times, yields on gold loans for some banks have actually risen year-on-year, providing an earnings tailwind on top of volume growth. Gaurav Bhandari, CEO of Monarch Networth Capital, noted that "This has helped asset quality and supported balanced portfolio growth for banks with disciplined underwriting frameworks." The appeal for lenders lies in gold loans being secured against jewellery collateral, carrying lower credit risk, and offering strong repayment discipline compared to unsecured personal loans. According to The Economic Times, RBI data shows gold loans growing approximately 128% year-on-year, outpacing overall credit growth by a wide margin.
As reported by The Economic Times, CSB Bank and City Union Bank have been strategically expanding their gold loan portfolios and leveraging branch networks for deeper retail penetration. Canara Bank, as a large PSU lender, can capture broad demand while managing risk through a diversified balance sheet. Karur Vysya Bank, a niche private bank with a strong regional retail franchise, benefits from secured loan growth in its home market. According to The Economic Times, smaller southern private and PSU banks, which dominate the gold loan league table, have traditionally been active in this segment and are well acquainted with dealing with the nuances of gold loan segments. Hemant Sagare from Brickwork Ratings added that "These banks, mostly based in the southern part of the country, have traditionally been active in the gold loan segment and are well acquainted in dealing with the nuances of such loan segments in case of any exigencies." Among non-bank lenders, gold loan specialists Muthoot Finance and Manappuram have historically outperformed due to their focused models and strong collateral quality, though they operate outside the traditional banking framework.
According to The Economic Times, analysts are monitoring concentration risk as gold prices soften in the near term. Gaurav Bhandari from Monarch Networth Capital cautioned that "High gold loan mix isn't uniformly healthy and can heighten concentration risk if bullion prices reverse sharply or underwriting standards slip." Hemant Sagare from Brickwork Ratings echoed similar concerns, noting that "A sharp decline in gold prices typically triggers concern around smaller banks with heavy gold loan exposure, raising the spectre of LTV breaches, faster provisioning, and pressure on capital adequacy ratios." The report emphasizes the need for prudent LTV caps, diversification across segments, and robust risk controls to avoid systemic stress from overdependence on a single retail vertical. As noted by The Economic Times, a sharp decline in gold prices typically triggers concern around smaller banks with heavy gold loan exposure, raising the spectre of LTV breaches and pressure on capital adequacy ratios.
