India's Gold Wealth: A $3.8 Trillion Opportunity for Inclusive Growth
India stands at a critical crossroads where achieving inclusive economic growth necessitates extending opportunities beyond metropolitan hubs to Tier-2, Tier-3 cities, and rural heartlands. One of the most potent yet underleveraged assets in this transformative journey is the vast reservoir of household gold held by families across the nation.
The Immense Value of Household Gold in India
In recent years, the valuation of household gold has surged dramatically, more than doubling and substantially augmenting family wealth throughout India. According to a 2025 estimate by Morgan Stanley, Indian households possess nearly 34,600 tonnes of gold jewellery, with an approximate value of $3.8 trillion. This staggering amount represents almost 89 percent of the country's GDP. Much of this gold has been accumulated over generations or acquired to commemorate significant life events such as weddings and festivals.
While gold holds profound emotional and cultural significance, in its idle, stored form, it contributes minimally to economic dynamism. It is, therefore, imperative for India to implement effective policies that enable household gold to be utilized productively—without compelling families to relinquish their cherished ownership.
Gold Loans: Transforming Idle Assets into Economic Engines
Gold loans present a precisely tailored solution to this challenge. They empower households to unlock the economic value embedded in their gold while retaining emotional ownership, thereby transforming gold into a working asset that supports livelihoods, fuels enterprise, and fosters broader economic growth.
Over the past few years, regulators have taken meaningful strides by introducing balanced regulations designed to protect customers while simultaneously supporting sectoral development. These measures, set to take full effect from April 1, 2026, establish a stronger foundational framework. However, to fully unleash the potential of gold loans for driving inclusive growth, further strategic reforms are essential.
Boosting Rural Credit Access Through Gold Loans
Credit penetration in rural India remains notably low, especially among shopkeepers and Micro, Small, and Medium Enterprises (MSMEs)—estimated at nearly six million nationwide. Many continue to face barriers in accessing formal finance, even as they require working capital to upgrade infrastructure, manage inventory, and expand their business offerings.
Gold loans are ideally suited to address these short-term financial needs. Interest is charged only for the period the loan is utilized, allowing borrowers to repay when cash flows improve and re-borrow as required. This flexible credit cycle not only supports business growth and encourages financial discipline but also mobilizes household savings in a manner that benefits both individual borrowers and the broader economy.
Strengthening Last-Mile Credit via NBFC Branch Expansion
A primary reason for the low credit penetration in Tier-2, Tier-3, and rural areas is the limited physical presence of financial branches. Over time, Non-Banking Financial Companies (NBFCs) have demonstrated a superior capability to reach underserved regions, tailor products to local needs, and operate efficiently through well-established models.
For gold loans specifically, physical branches are essential and cannot be entirely replaced by digital channels, unlike unsecured personal loans. Encouraging NBFCs to expand their branch networks would significantly improve access and deepen market penetration in these areas.
Currently, regulatory restrictions and prescriptive guidelines on branch expansion can impede network growth. Liberalizing these norms—particularly for collateral-backed products like gold loans—would accelerate outreach while maintaining necessary prudential safeguards.
Rationalizing Risk Weights to Expand Gold Loan Supply
NBFCs play a critical role in last-mile credit delivery, especially for small-ticket and entry-level loans in rural areas. However, all NBFC loans currently carry a uniform 100 percent risk weight, which elevates the cost of lending and constrains credit supply.
Gold loans are regulated by Loan-to-Value (LTV) norms, similar to home loans, where risk weights vary based on LTV ratios. Extending a similar risk-based framework to gold loans could unlock substantial capital, enabling NBFCs to expand credit availability to deserving borrowers across the nation.
A coordinated approach between the Government and regulators can help establish a supportive policy framework that recognizes the broader economic and nation-building potential of expanding gold loan credit.
Reintegrating Temporarily Distressed Borrowers
Recent stress in unsecured lending segments, including microfinance, has adversely impacted the credit scores of millions of households. Many of these borrowers experienced temporary or one-time defaults and are now excluded from formal credit systems.
Targeted schemes are urgently needed to assist such borrowers in re-entering the formal financial ecosystem. Ensuring that temporary distress does not lead to permanent exclusion will allow households to regain access to credit and participate productively in the economy once again.
Reforming SARFAESI Norms to Expand Rural Housing Credit
Housing serves as a powerful economic driver in rural India, with strong linkages to nearly 50 sectors. While banks offer rural housing loans, their reach in smaller ticket sizes—below ₹10–15 lakh—remains limited. NBFCs, with their extensive branch networks, are better positioned to serve this segment effectively.
However, provisions under the SARFAESI Act restrict NBFCs' ability to recover smaller-ticket secured loans, as enforcement is permitted only for outstanding amounts of ₹20 lakh and above. Harmonizing SARFAESI applicability for NBFCs in line with banks and housing finance companies would significantly improve credit flow and accelerate rural housing growth.
Bringing Gold Lending into the Formal Economy
An estimated 60 percent of gold lending remains unregulated and operates outside formal channels. In contrast, formal gold loans function under clear regulatory guidelines and supervision. Allowing greater flexibility in NBFC branch expansion would accelerate the formalization process and extend regulated credit to underserved markets.
With a robust regulatory framework already established, wider branch access can help integrate millions of borrowers into the formal financial system, enhancing transparency and security.
The Path Forward: Policy Support for Inclusive Growth
The upcoming Union Budget presents a timely and crucial opportunity to build upon existing reforms. With continued policy support and regulatory alignment, gold loans can unlock immense household wealth, deepen rural credit access, and drive inclusive growth across Tier-2, Tier-3, and rural India. By transforming idle gold into active capital, India can harness this $3.8 trillion asset to fuel economic empowerment and sustainable development nationwide.
