Gold prices have surged to an all-time high of ₹85,000 per 10 grams, triggering a sharp rise in gold-backed financing. This surge has significantly boosted the gold loan portfolios of both banks and non-banking financial companies (NBFCs), with overall demand witnessing unprecedented growth.
According to Reserve Bank of India (RBI) data from December 2024, bank-issued gold loans skyrocketed by 71%, reaching ₹1.72 lakh crore. Leading NBFCs such as Muthoot Finance and Manappuram Finance have also recorded substantial portfolio expansions, driven by increased consumer reliance on gold as a financial safety net.
As their popularity rose bank gold loans soared by 71% between years reaching an overall amount of a rather surprising Rs 1.72 lakh crore as informed by the Reserve Bank of India status data in December 2024. Gold loan procedures of financial institutions have also been made in line with the recent increase in Gold Price.
During this time Muthoot Finance alongside other NBFCs operated with growth rates that trailed banking institutions. Muthoot Finance achieved a 34% increase in gold loan portfolio value which amounted to Rs 92,963.6 crore during December 2024.
At the end of the third quarter of FY25 Manappuram Finance reported a nearly 19% growth in its gold loan portfolio which reached Rs 23,700 crore. These statistics demonstrate that economic instability leads people to increasingly use their assets in gold to secure financings through loans.
The ownership interest in Muthoot Finance gold loan operations has gained substantial support from investors since the share price reached Rs 2,265 which approached its highest level over 52 weeks. Market swings across all sectors have not stopped these stocks from delivering stronger results than most sector competitors.
The year-on-year growth of Muthoot Finance's net interest income reached close to 43% while its net profit demonstrated a 32.7% increase. The net interest margin (NIM) of the company showed a minor decrease yet operates at better levels than SBI and HDFC Bank's NIMs.
Households use gold as a financing tool because they need additional funds during hard times therefore the gold loan industry shows rising demand. The economic slowdown together with a reduction in urban employment opportunities pushes more individuals to commit their gold as collateral for financial needs to support business and family crises. Digital platforms function as vital loan facilitators through which customers obtain money and conduct online payments.
The financial industry has developed its dependence on Gold loan NBFCs as the demand for secured loans keeps growing steadily. The combination of increasing gold prices and digital market capabilities generates new business potential for these companies.