Bajaj Finance has been on a gold lending spree. Its gold loan assets under management (AUM) stood at about ₹18,000 crore at the end of FY26, up 115% from the previous year. By September 2026, that figure had jumped to ₹24,195 crore, a 105% year-on-year increase. Yet, gold still represents only about 4–6% of Bajaj's total AUM. Management expects this to reach roughly 5% by FY27 end. Transcript +2
The picture looks starkly different at the gold specialists. Manappuram Finance reports gold loans at 82% of its consolidated AUM, up from 80% in the prior quarter. Standalone, that figure is 90%. Muthoot Finance saw its gold AUM surge ₹57,000 crore (54%) to ₹1,65,000 crore over the year. For these players, gold is the business. For Bajaj, it's an add-on. Transcript +2
This divergence matters because concentration risk is real. The Reserve Bank of India (RBI) has long described gold lending as having "inherent concentration risk" tied to gold price movements. When gold is your entire book, a price correction hits your core. When it's 4%, it's a manageable line item.
Bajaj's gold loan story hit a speed bump in Q2 FY27. The company reported that first-bucket overdue loans (those just past due) jumped from about 0.6% in June 2026 to roughly 3.5% in September. The second bucket rose to 1.1%, and the third to 0.3%. Investor Presentation
These schemes drove about ₹1,047 crore of gold loans into Stage 2 and 3 during the quarter. Overall, Stage 2 and 3 assets rose to 2.02% from 1.87%. However, Bajaj says that after adjusting for this "transient" gold movement, Stage 2 and 3 actually improved to 1.88% from 1.90%. The company does not expect a credit cost impact. Investor Presentation +1
Several factors likely contributed beyond the specific schemes. Bajaj's gold book has doubled in a year, and branches expanded from 1,701 to 2,022 in just one quarter. Fast-growing books are young, and overdues often appear as they season. About 95% of gold customers are self-employed, and management describes the product as having low credit filters. That's great for growth, but it raises questions about underwriting quality at scale. Investor Presentation +2
Early stress isn't unique to Bajaj. IIFL Finance saw its gold gross non-performing assets (GNPA) rise to 0.61% in Q1 FY27 from 0.35% in the prior quarter. Its 30+ days past due (DPD) stands at about 3.8%, which management calls marginal and seasonal. Muthoot Finance reported Stage 3 assets stable at 2.28%, but Stage 2 surged nearly 77% quarter-on-quarter. Piramal Finance has flagged gold loans as an "emerging area of risk," noting that about 35% of its customers hold a gold loan from another institution. Investor Presentation +2
The industry has grown explosively. Bank gold loans rose 83% year-on-year to ₹5.6 trillion in August 2026, while NBFC gold loans jumped 69% to ₹3.6 trillion. Delinquencies remain low overall, but the rapid expansion and rising early buckets suggest the sector is entering a testing phase.
Here's where the math gets interesting. Recovery prospects depend heavily on loan-to-value (LTV) ratios and gold prices. Muthoot reports an average LTV of about 57% or lower. Manappuram's LTV rose to 65.6% in June from 57.3% in March, largely because gold prices fell about 8.5%—a denominator effect, not riskier lending. IIFL's LTV sits around 70%. Bajaj hasn't disclosed its LTV, which is a significant gap. Transcript +2
The RBI's new framework, effective April 1, 2026, introduced tiered LTV caps: 85% for loans up to ₹2.5 lakh, 80% up to ₹5 lakh, and 75% above that. But the real buffer is narrower than it seems. Accrued interest sits on top of principal, and auction realisations typically run 8–15% below assessed value. One analysis estimates lenders' effective price buffer at just 7–8%.
If gold falls toward $2,500, the expansion argument weakens. Muthoot's gold price per gram dropped from ₹13,441 in March to ₹12,942 in June. A sharper decline would test collateral cushions across the board. Transcript +2
If stress intensifies, regulatory attention could follow. The RBI has form here. In 2012, it capped NBFC gold LTV at 60% and required 12% Tier 1 capital for lenders with at least 50% of financial assets in gold loans. New rules could include higher risk weights, lower LTV caps, or provisioning floors.
Bajaj is well-positioned to absorb regulatory shocks. Its capital adequacy ratio (CRAR) stands at 20.33%, with Tier I at 19.43%. Gold is a small slice of its assets, so higher risk weights would barely move the needle. IIFL Finance is more exposed—its standalone CRAR is 17%, and an analyst noted gold loans carry a 125% risk weight, putting the parent near regulatory minimums. Manappuram and Muthoot, with their gold-heavy books, would feel any gold-specific rules most acutely. Investor Presentation +2
On funding, Bajaj's cost of funds is 7.40%, with borrowings split 49% from money markets, 26% from banks, and 19% from deposits. Manappuram relies on banks for about 60% of its funding. If lenders price in systemic risk, NBFC funding costs could rise, pressuring margins. Bajaj's diversified funding mix provides some insulation. Investor Presentation +1
Bajaj has already made one decisive move: stopping the short-tenor schemes that caused the Q2 spike. It's also taken a ₹337 crore management and macro-economic provision as a buffer. But the Q2 FY27 earnings call transcript isn't available, so we don't know if management has outlined broader collections or pricing strategies. Investor Presentation +1
The company faces a trade-off. It could slow the branch rollout (targeting 2,700–2,800 by FY27 end) to let the book season, or tighten LTV and credit filters to improve quality at the cost of growth. Alternatively, it could stay the course, betting that the stress is transient and that its capital strength and diversified franchise can absorb any hits. Investor Presentation
Competitive positioning hinges on this choice. If stress remains contained, Bajaj's large branch network and low funding cost could help it gain share against specialists. If stress broadens, Bajaj can afford to dial back gold without derailing overall growth—something Manappuram and Muthoot cannot easily do. New entrants like Tata Capital, Aditya Birla Capital, and L&T Finance are still building networks and would face the toughest environment in a downturn. Transcript +2
The coming quarters will be telling. Watch whether Bajaj's first-bucket overdues fall back from that 3.5% peak. Look for disclosure of LTV and auction recoveries—critical missing pieces. Monitor if the branch target holds or gets trimmed. And keep an eye on peers, especially Muthoot and Manappuram, for signs of broader sector stress.
For now, Bajaj's gold loan expansion has been a growth engine, but the early delinquency signals are a reminder that rapid scaling in a single-asset product carries risks. The company has the balance sheet to manage through turbulence, but the market will be watching closely to see if this is a temporary blip or the start of a deeper reckoning in India's gold loan boom.
