Early Warning Signs in Gold Lending
Major Indian non-banking financial companies (NBFCs) Bajaj Finance and Piramal Finance have disclosed early indicators of stress within the gold loan segment, which has emerged as the fastest-growing area of consumer lending in India. While delinquency rates in this sector remain historically low, both lenders have flagged rising concerns regarding borrower behavior and portfolio quality.
According to recent data from the Reserve Bank of India (RBI), bank loans against gold experienced a sharp 83% year-on-year increase in August 2026, reaching Rs 5.6 lakh crore. In the same period, gold loans extended by non-bank lenders grew by 69% to Rs 3.6 trillion. This rapid expansion has been driven by both banks and NBFCs viewing gold-collateralized loans as a secure asset class.
Bajaj Finance’s Portfolio Shift
Bajaj Finance, which maintains a gold loan portfolio valued at Rs 240 billion (approximately $2.54 billion), reported a rise in the proportion of loans overdue by more than 30 days during its July-September quarter. The lender noted that assets classified as 'Stage 2' and 'Stage 3'—indicating loans with payment delays exceeding 30 days—increased by 15 basis points compared to the previous quarter.
The company attributed a significant portion of this increase to short-term gold loans, a product category it has since stopped offering. Despite these early stress signals, Bajaj Finance reported a nearly 30% year-on-year rise in consolidated profit after tax. However, market reaction was mixed, with shares trading 3.2% lower at Rs 926.80 as of 12:40 p.m. IST, while the broader Nifty 50 index declined by 0.6%.
Piramal Finance Highlights Cross-Lending Risks
Piramal Finance also identified the rapid growth in gold loans as an emerging risk area. In an analyst call, CEO Jairam Sridharan revealed that nearly 35% of the lender’s customers holding gold loans also have gold loans with other financial institutions. This overlap suggests a potential for over-leveraging among borrowers.
Sridharan further cited industry-wide data indicating that in the 2025-26 fiscal year, approximately Rs 4.7 trillion in gold loan disbursements were made to customers who already had loans overdue by more than 90 days. "Today, presence of a gold loan on file is not an indicator of higher risk on the portfolio, but these data points are worth noting and tracking," Sridharan stated.
Piramal Finance reported a 66% year-on-year increase in profit after tax to Rs 5.45 billion. Its shares were trading 3.7% higher at Rs 2,019.50 per share at the time of reporting.
Market Context and Future Risks
Brokerages have pointed to several macroeconomic and regulatory factors that could exacerbate risks for lenders in this segment. These include rising inflation, potential Reserve Bank of India curbs on revolving credit, and tighter commission rules from the insurance regulator. As the gold loan segment continues to expand, lenders are likely to tighten underwriting standards and monitor cross-lending patterns more closely to mitigate potential credit losses.