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Gold Loans Shift: NPAs Rise, Market Surges Past ₹30 Lakh Crore
30 Jul
Summary
- Gold loan NPAs for NBFCs may increase due to a shift to monthly payments.
- The overall gold loan market is projected to grow over 30% by March 2028.
- NBFCs' market share in gold loans is expected to reach 23% by 2027-28.
Gold loan non-performing assets (NPAs) for NBFCs are likely to increase as lenders adopt monthly installment schemes over traditional bullet payments. This shift, however, is not expected to result in significant credit losses, as gold assets can be auctioned for recovery. The overall gold loan market is poised for substantial growth, projected to surge by over 30% to reach ₹30 lakh crore by March 2028.
Analysts anticipate NBFCs will expand their market share to 23% by the fiscal year 2027-28. This growth is supported by the entry of new players and increased participation from banks. Such competitive intensity could pressure business yields for NBFCs, but the overall expansion is robust.
The transition to regular payments may lead to higher near-term overdues as borrowers adapt. Lenders must maintain adequate risk controls, especially considering potential gold price volatility. Approximately 90% of NBFC gold loans were linked to bullet payments as of March, making them more vulnerable to price drops.
