A new chapter is unfolding in India’s gold loan market. As gold prices touch record highs and middle-class families find it increasingly difficult to buy gold, this has opened a golden opportunity for gold loan companies. With gold now trading around Rs 1,23,600 per 10 grams, shares of leading gold loan companies are also hovering near their 52-week highs. Muthoot Finance’s stock, for instance, is trading at Rs 3,180, very close to its 52-week high of Rs 3,263.
Let us take a closer look at the current state of India’s gold loan market and its future growth prospects.
What’s Happening?
The growth in the gold loan sector has primarily been driven by the surge in gold valuations. Between FY20 and FY25, the volume of pledged gold grew at a modest CAGR of just 1.7%, but the average loan ticket size more than doubled during this period. Alongside this, organised gold loans grew at a sharp annual rate of 26% in FY24–FY25, reaching Rs 11.8 trillion by March 2025. Currently, banks hold about 82% of the organised gold loan market, a higher share than before. Meanwhile, NBFCs’ share has declined from 22% in March 2021 to 18%.
As of June 2025, NBFCs’ gold loan AUM stood at Rs 2.4 trillion, showing a strong 41% YoY growth. However, the segment remains highly concentrated, with the top four NBFCs holding 81% market share, down from 90% in March 2022.
Strong Margins – The Real Strength
The biggest strength of gold loan companies lies in their high Net Interest Margins (NIM). Muthoot Finance reported an NIM of 12.15% in the June 2025 quarter, up from 11.51% a year earlier. In comparison, SBI’s domestic operations had an NIM of 3.02%, while HDFC Bank’s stood at 3.5%. This wide gap clearly highlights that gold loan companies enjoy significantly better margins than traditional banks.
Muthoot Finance’s standalone net profit reached Rs 2,046.2 crore in the June 2025 quarter, marking nearly 90% YoY growth. This demonstrates the strong profitability within the sector.
Growth in the Gold Loan Sector
During FY24–FY25, the gold loan sector grew at a CAGR of around 26%, reaching Rs 11.8 trillion by March 2025. During this period, banks recorded higher growth than NBFCs, leading to a decline in NBFCs’ share within the organised market.
According to ICRA data, by June 2025, NBFCs’ gold loan AUM had reached Rs 2.4 trillion, showing robust 41% YoY growth. However, the segment remains concentrated, with the top four NBFCs holding 81% of the market share, down from 90% in March 2022.
This trend indicates that while the gold loan market is expanding rapidly, rising competition and aggressive strategies by banks have created a challenging environment for NBFCs.
What’s in it for Investors?
Despite the decline in market share, gold loan NBFCs remain an attractive investment opportunity. Although their share in the market has shrunk, the overall market is expanding so rapidly that their absolute business size continues to grow. ICRA estimates that the gold loan AUM of NBFCs will rise another 30–35% by FY2026. The top four NBFCs in this space command 81% of the market, giving them a strong competitive edge.
Analysing stock performance, both Manappuram Finance and Muthoot Finance have outperformed the Nifty and Bank Nifty with over 40% YTD returns.
According to The Financial Express, in terms of valuation, Manappuram Finance is trading at around 15x FY26E P/E, while Muthoot Finance is at about 17x FY26E P/E. Meanwhile, the mid-sized bank Federal Bank is available at roughly 12x FY26E P/E. In the medium term, growth prospects for gold loan NBFCs appear strong, although current valuations seem slightly expensive. The coming years will reveal whether this rapid growth can sustain the momentum.
What’s Next?
In the years ahead, India’s gold loan market shows no signs of slowing down. According to ICRA, the organised gold loan market could touch Rs 18 trillion by FY27. The biggest reason behind this growth is the vast amount of ‘free gold held’ in Indian households, gold that remains unleveraged for loans.
Estimates suggest India holds around 25,000–27,000 tonnes of gold, valued in trillions of dollars. With rising inflation, limited job opportunities, and stagnant urban incomes, families are increasingly pledging their gold to raise funds for businesses, weddings, or emergencies. This trend shows that gold is no longer just a symbol of tradition, it has become an emergency asset, one that could drive the gold loan industry to new heights.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
