Market share of gold loan lenders India 2023, by financial institution

As of September 2023, NBFCs dominated the gold loan market with a 61 percent market share. Banks, on the other hand, held only 39 percent of market share. Indian population has traditionally relied on gold as a means of investment. The country is the second-largest importer of gold in the world. Banks and non-banking financial companies are currently the major players in offering secured loans with gold as collateral.

Process of taking a gold loan

To apply for a gold loan a borrower usually approaches these institutions, which is followed by a purity check of gold to evaluate its market value. A borrower usually keeps their gold ranging from eighteen to twenty-four carats with the lender for getting credit. The interest rates on gold loans can range between 7.35 percent to 29 percent per annum depending on the bank. Gold’s present market value called the loan-to-value (LTV) ratio usually fixed by the Reserve bank of India determines the amount a consumer is eligible to get against gold.

New digital players

Online gold loan options are increasingly being offered; however, a customer is still required to visit the bank or NBFC branch for depositing the gold and its purity check. But a large part of the gold loan market is still unorganized, leaving customers exposed to high-interest rates. Certain fintech startups are now entering the market space offering services with lower interest, flexible EMIs, and door-to-door delivery and pickup. The entry of new players in this traditional marketplace is expected to increase the penetration rate of the gold loan market.