Gold loans in India have seen rapid growth, reflecting their increasing popularity as a financial instrument. However, the Reserve Bank of India (RBI) has raised concerns over irregular practices in the gold lending sector, prompting regulatory measures to ensure transparency and sustainability.

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• Gold loans surged significantly in the year ending September 2024 compared to the previous year, reflecting high demand.
• The RBI highlighted irregular practices, including issues in gold valuation, due diligence, and loan fund monitoring.
• Comprehensive guidelines issued by the RBI on September 30, 2024, aim to address gaps in policies and processes.
• NBFCs dominate the gold loan market, holding a 59.9% share of total gold loans as of March 2024.
• NBFCs continue to play a critical role, serving borrowers reliant on gold jewelry and ornaments for securing loans.
• Other retail lending categories, such as personal loans and microfinance, experienced a sharp slowdown in growth.
• Credit growth in microfinance and self-help group (SHG) loans fell by over two-thirds in the past year.
• RBI’s measures target sustainable growth in gold loan portfolios while curbing malpractice.
• The growing reliance on gold loans highlights economic shifts, with borrowers turning to secured lending amid financial challenges.