The landscape of bank lending in India is undergoing a significant transformation, with gold-backed loans emerging as a powerhouse of growth. Fresh data reveals an explosive 125% year-on-year surge in gold loans as of November 2025, dramatically outpacing the overall bank credit growth of 11.5%.
Anatomy of the Gold Loan Boom
This remarkable increase follows a substantial 77% rise recorded the previous year, highlighting a sustained upward trend. The outstanding portfolio for gold loans now stands at a staggering Rs 3.6 lakh crore. While this figure represents less than 2% of the total bank credit, its contribution to fresh lending is disproportionately high. Gold loans accounted for a significant 12% of all incremental bank credit up to November 2025. Over the past twelve months, an estimated Rs 1.5 lakh crore has been added to this portfolio.
Banking experts point to a confluence of three key drivers behind this surge:
- Lender Preference for Security: In a cautious credit environment, banks are actively favoring secured loans over unsecured products.
- Rally in Gold Prices: The sustained increase in gold prices has enhanced the borrowing capacity of households, as the same jewellery now offers higher loan value.
- Regulatory Reclassification: Following a directive from the Reserve Bank of India (RBI), some agricultural loans backed by gold jewellery have been reclassified as gold loans, adding to the numbers.
A Broader Shift in Credit Dynamics
Gold loans are not the only segment fueling growth. Micro and small enterprises (MSEs) have shown parallel strength. With an outstanding book of Rs 9.5 lakh crore (about 5% of total loans), MSEs also contributed 12% of fresh credit, adding another Rs 1.5 lakh crore in the current fiscal year (FY26).
These trends collectively signal a clear pivot: rising demand for secured personal borrowing and a renewed banking emphasis on small-ticket, priority-sector lending. This shift comes as large corporations reduce their reliance on bank loans and lenders grow wary of unsecured credit exposures.
Large Industry Loses Momentum, Personal Loans Lead
The data underscores a notable slowdown in credit to large industries. Despite constituting 15% of outstanding credit (Rs 28.7 lakh crore), this segment attracted a mere 3.6% of incremental loans, with fresh additions of only Rs 46,090 crore. This suggests continued deleveraging by big firms and their preference for bond markets or internal funds over traditional bank finance.
In contrast, personal loans remain the largest engine of overall credit growth Credit to weaker sections and priority areas somewhat lagged, drawing 6% of new lending against a 10% share of the outstanding portfolio. With total outstanding bank credit at Rs 195.2 lakh crore, the patterns up to November 2025 point to a structural change. The banking sector's credit mix is decisively moving away from its traditional anchor of large industry and towards consumers and small businesses. This rebalancing is set to shape the risk profiles and returns of Indian banks in the coming years.
