India’s gold loan industry is entering a structurally significant expansion phase, and the next leg of growth is no longer being driven by metropolitan India. Instead, Tier 2 and Tier 3 cities are emerging as the primary engines of incremental demand in secured retail credit. What was once considered a peripheral geography is now central to the industry’s forward trajectory. The shift is visible across regulatory data, rating agency commentary, borrower behaviour trends, and regional economic patterns.

Gold Loans Are Growing Faster Than Retail Credit

Recent data from the Reserve Bank of India (RBI) indicates that credit against gold jewellery has been expanding materially faster than overall retail lending. While aggregate retail credit growth has moderated to the mid-teens, gold loans have recorded year-on-year growth exceeding 30% in multiple months across FY24 and FY25.

First, the domestic gold prices have appreciated substantially over the past year, and this has increased the borrowing base. The gold prices have a direct positive impact on loan eligibility as per the loan-to-value ratios.

Second, the risk weights in unsecured retail loans have increased, and this has led to a shift in the preference of both lenders and borrowers towards secured loans.

Third, the borrowers are being more cautious in their borrowing decisions, and they are showing a preference for collateralized borrowing due to the changing macroeconomic conditions.

It is significant to note that the 75% LTV ratio imposed by the RBI has been providing a cushion against systemic instability, and this has been preventing leverage from becoming excessive even when gold prices become volatile.

The Under Monetised Gold Opportunity


India remains one of the largest private holders of gold globally. Estimates from the World Gold Council suggest Indian households hold more than 25,000 tonnes of gold.
Yet the organised gold loan market is estimated at roughly ₹4–5 lakh crore implying that only a small fraction of household gold stock is monetised through formal lending channels.

A substantial share of household gold ownership is concentrated in semi urban and rural India, where physical assets remain the dominant store of wealth. In these regions, gold functions not merely as ornamentation but as a financial buffer a reserve asset that can be mobilised during liquidity needs.

Regional Credit Rebalancing Is Underway

Gold loan is particularly well aligned to the financial rhythms of smaller cities and semi urban markets, where business cycles are seasonal and liquidity needs are immediate.

In contrast to the credit penetration in metropolitan India, where the credit market is already relatively deep and the level of competition between banks and NBFCs is high, Tier 2 and Tier 3 cities are structurally underpenetrated secured credit markets. Financial inclusion has improved substantially in the last decade, but access to formal, collateralized liquidity is still limited compared to economic activity in these areas.

Gold loan NBFCs and gold loan specialists have thus increased their branch presence disproportionately in non-metro areas. Industry data shows that a large share of new branch additions in the last two years has been in semi-urban and rural geographies rather than Tier 1 cities. This reflects both higher marginal demand and higher customer stickiness in these geographies.

Importantly, metro markets are approaching maturity in terms of gold loan penetration.
The local economies in these regions are driven by trading activities, small manufacturing units, Agri-linked businesses, and small family-owned businesses. The working capital needs are short term and seasonal. Gold loans, with loan cycles measured in hours, not days, are specifically designed for such liquidity patterns.

Operational Barriers Create Competitive Advantage

Gold loan business is vastly different from retail unsecured lending. It requires operational expertise and physical infrastructure, such as branch level purity testing, safe vault management, collateral management. Gold loans sit at a unique intersection combining embedded household wealth with immediate liquidity demand. And that intersection is most pronounced in Tier 2 and Tier 3 India.

The next phase of gold loan growth will be shaped less by metropolitan demand and more by the expanding economic momentum of Tier 2 and Tier 3 India. With high household gold ownership, rising formalisation, and growing liquidity needs, these regions are becoming the natural epicentre of secured credit expansion. As India’s growth broadens geographically, gold loans are set to follow firmly anchored beyond the metros.

Priyank Kothari, Director of Arvog