Gold Hits Rs 1.6L, NBFC Leads Gold Loan Growth
If you’ve been following the Indian financial markets even casually, you may have seen a dramatic spike in gold loans over the past year. I find this trend personally fascinating, not simply for the numbers involved, but because it is a story about how regular families and businesses are responding to financial pressures in today’s economy.
When I first started tracking gold loan NBFCs, I used to think that it was another niche lending segment. But the more I delved into it, the broader the implications became: The consumer finance shows something larger, a change in household psychology fed by digital finance and a unique investment opportunity for anyone willing to take the time to underwrite what’s happening underneath.
In this article, I’ll break down what is driving the boom while also diving deeper into how top-rated NBFCs such as Muthoot Finance and Manappuram Finance have been doing, what’s behind investor confidence, in addition to the risks that could be staring investors in the face, or from an investing perspective, vis-à-vis 2026. You will also receive my personal view on the industry, as well as knowledge on margins, valuations, and upcoming catalysts.
Why Gold Loans Are Booming
To put things in perspective, the overall gold loan market in India was Rs 3.58 lakh crore as of late November 2025, compared with Rs 1.59 lakh crore a year before. That’s not an incremental shift; it’s a sign of how much households and businesses are relying on gold as collateral, more than ever.
In urban areas, it’s often about bridging cash-flow gaps when employment is uncertain or when business capital is tight. In rural India, farmers are leveraging gold loans for agriculture-related funding, particularly in regions where formal banking access remains limited. Personally, this tells me gold loans are not just a trend; they are becoming a core financing tool for a wide spectrum of Indians.
Adding to the context, gold prices themselves have climbed significantly. In Mumbai, 10 grams of gold costs about Rs 1.6 lakh, which is an increase of close to 80% over the last year. Thinking about these price dynamics, combined with the increase in demand for gold-backed loans, tells me a story of momentum and sustainability.
My Take on Leading Players
If I’m considering investments in this space, I look closely at the big names: Muthoot Finance and Manappuram Finance.
- Muthoot Finance, India’s largest gold loan NBFC, has reported an amazing growth. Its standalone gold loan AUM (asset under management) grew 51 per cent YoY to Rs 1.47 lakh crore in Q3FY26, the highest-ever recorded. Its net interest margin (NIM), a metric I follow closely, was 12.8%, up from 11.6% a year earlier. This tells me that the company isn’t just lending more, it’s lending smartly.
- Manappuram Finance, another key player, reported a standalone gold loan portfolio of Rs 37,144 crore, an increase of 56.8%. Even as its net realised yield dropped marginally to 18.5% from 22.2%, the fact remains that online gold loans now form 92% of their loan book, with average ticket size moving up from Rs 73,000 to Rs 1.1 lakh over a year. Digital adoption evidently enables them to scale rapidly with relatively low costs.
From an investor’s perspective, these numbers are compelling, but I also pay attention to asset quality. Muthoot’s Stage III loans to gross assets ratio is just 1.3%, down from 3.5% a year ago, while Manappuram’s net NPA remains stable at 2.2%. Strong growth with low non-performing assets is a combination I personally find very reassuring.
Also Read: Gold Prices Hit Record Highs: 5 Key Factors Driving the Rally and What It Means for Investors
What’s Driving My Confidence
One thing that fascinates me about gold loans is how resilient their margins are. Despite banks like HDFC Bank feeling NIM pressure at 3.5% in Q3FY26, Gold Loan NBFCs continued to deliver strong returns. To me, this says that the business model is fundamentally strong, and particularly in a low-interest-rate environment, when one would assume classic loans to be less relevant.
The industry is also helped along by a psychological factor: gold has always been a reliable savings option for Indian households. Around 25,000 to 27,000 tonnes of gold are held in India, with an estimated value of $4–6 trillion. When households are under pressure, be it for emergencies, wedding plans and business loans, they seek gold loans. This is what leads me to believe that demand will be there, even as the gold price swings modestly.
Valuations, ROE, and Investment Lens
When assessing stocks, I prioritise Return on Equity (ROE) and price-to-book ratios. Muthoot Finance has ROE of 19.7% with a price-to-book of 5.1x; Manappuram Finance’s ROE is 16% and the firm commands a price to book of 2.1x while HDFC Bank has an ROE of about 14.3% and price-to-book multiple stands at around are less than or equal to that is about 2.6x.
What this tells me is that the market is paying a premium for growing and efficiency in gold loan NBFCs; then again, considering their strong fundamentals and their deepening digital links, the premium looks justified. For me, I’d keep a close eye on those stocks in 2026 if gold demand remains strong.
Emerging Catalysts
There are a few factors I am keeping on my radar as potential growth triggers:
- M&A and strategic investments: Bain Capital is awaiting regulatory approval to purchase 18% stake in Manappuram Finance, which may trigger an open offer for another 26%. Any such actions could transform ownership and increase capital for growth.
- Funding for expansion: Muthoot Finance raised $600 million (approx. Rs 5,400 crore) via a Global Medium Term Note Programme, which could fuel further gold loan growth in the upcoming quarters.
- Digital adoption: Both NBFCs have focused on online gold loans, which now form a large chunk of new loans. Digital tools for onboarding and repayments mean the process is fast, efficient and less expensive.
For me, these catalysts suggest that the sector’s long-term trajectory remains positive, even if short-term gold price corrections occur.
Where I See Risks
No sector is without risk. Though gold loan NBFCs are fundamentally strong, I am sceptical about:
- Gold price volatility: A sudden reversal could impact the values of collateral and demand for loans.
- Regulatory changes: An RBI intervention may affect borrowing rates or norms of asset classification.
- Competition and credit quality: Increasing competition and rising operating costs could pressure margins if not managed well.
Even with these factors, I believe the risk-reward profile is attractive for patient investors.
My Takeaway
For someone who keeps an eye on markets and personal finance, gold loan NBFCs offer an interesting intersection of consumer behaviour, asset prices and the efficiency in lending. The numbers show strong growth, high margins, and low NPAs, while the psychology of Indian households ensures persistent demand.
If you’re exploring investment ideas for 2026, I would consider keeping a watch list of Muthoot Finance and Manappuram Finance, alongside keeping an eye on HDFC Bank as a benchmark. Diversifying with a mix of NBFCs and banks could give exposure to both high-growth lending and stable banking fundamentals.
Also Read: Gold & Silver ETFs Plunge 17%: What the Sell-Off Signals
Disclaimer
The article is for informational purposes only and does not constitute financial advice. Investing in a gold loan NBFC or any other financial product comes with a risk, and readers need to do their own research or talk to a financial advisor before making investment decisions.
