Gold Loan Boom Fuels Record Bank Credit Growth in India
Mumbai: The gold loan sector is experiencing an unprecedented boom, with lending against the yellow metal expanding at a staggering triple-digit rate of 128% year-on-year. This surge is a key driver behind the robust growth in personal loans, which in turn underpins the overall 14.4% increase in bank credit as of January 31, 2026.
Personal Loans Lead Sectoral Credit Deployment
Data from the Reserve Bank of India (RBI) on sectoral deployment of bank credit reveals that personal loans are outpacing all other segments. Growing at 34.5%, they now account for approximately one-third of total bank credit. This is followed by the services sector, within which lending to Non-Banking Financial Companies (NBFCs) stands out as the fastest-growing component.
In contrast, industrial credit presents a mixed picture. Loans to micro, small, and medium enterprises (MSMEs) are expanding briskly, while borrowing by large corporates remains subdued, indicating a shift in credit demand dynamics within the industrial landscape.
Gold Loans Cross Historic Rs 4 Lakh Crore Milestone
Outstanding loans against gold jewellery have crossed the Rs 4 lakh crore mark for the first time, reaching an impressive Rs 4,00,517 crore as of January 31, 2026. Gold loans now constitute 9% of incremental bank credit, highlighting their significant contribution to the banking sector's expansion.
The growth trajectory is even more remarkable over a two-year period. Between January 26, 2024, and January 31, 2026, outstanding credit backed by gold jewellery surged by nearly Rs 3.1 lakh crore. This represents an overall increase of about 338% over two years, effectively expanding the gold loan portfolio more than fourfold.
Key Drivers Behind the Surge
Two primary factors explain this explosive growth in gold loans. First, the cost of gold has climbed dramatically by 152% over the past two years, increasing the collateral value and making gold-backed lending more attractive for both borrowers and lenders. Second, a regulatory directive now requires banks to classify loans secured by gold specifically as gold loans, providing clearer data and potentially encouraging more structured lending in this segment.
Overall Bank Credit Growth Remains Strong
Overall non-food bank credit rose by 14.4% year-on-year as of January 31, 2026, compared to January 24, 2025. For the financial year to date since March 21, 2025, credit expanded by 12%, translating into incremental growth of Rs 21.8 lakh crore in the non-food loan book. This robust expansion underscores the resilience and dynamism of India's banking sector, with gold loans playing a pivotal role in fueling this growth engine.
