Two major Indian lenders, Bajaj Finance and Piramal Finance, are seeing early signs of trouble in gold loans. Over the past year, lending against gold has been the fastest-growing part of their business.
Why Lenders Rushed Into Gold Loans
Banks and financial companies have been rushing to offer these loans, believing that holding a borrower’s physical gold makes the investment safe and low-risk. The recent surge in lending reflects that confidence in gold-backed security.
Sector Growth Per RBI Data
According to official data from the Reserve Bank of India:
Bank gold loans jumped 83% compared with last year, reaching ₹5.6 trillion
Non-bank gold loans grew 69%, rising to ₹3.6 trillion
Although overall default rates are still low, both Bajaj Finance and Piramal Finance are urging caution.
Bajaj Finance Reports Rising Late Payments
Bajaj Finance holds ₹240 billion (about $2.54 billion) in gold loans
In its July–September results, it reported an increase in late payments
The portion of loans overdue by 30 days or more, classified as ‘stage 2’ and ‘stage 3’ assets, rose by 15 basis points compared with the previous quarter
The lender said overall assets in these categories, which reflect loans overdue by more than 30 days, rose 15 basis points from a quarter ago
The early warnings come after a year of rapid expansion in gold-backed lending, with both banks and non-banking lenders growing their books sharply on the assumption that physical gold collateral limits risk.