Surge in gold loans not a cause for concern, says Reserve Bank of India

Banks are shifting from unsecured loans to gold-backed lending amid rising gold prices, but RBI says low LTVs and limited exposure pose no systemic risk

The Reserve Bank of India (RBI) on Friday said the sharp rise in gold loans amid higher gold prices is not a major cause for concern for the banking system at present. 

 

The central bank said that the sharp rise was a result of banks shifting away from unsecured loans to gold-backed collateralised lending.

 

“We have been reviewing all the portfolios, whether it is gold loans, whether it is MSMEs, whether it is personal loans, all categories they show good asset quality, low slippages and no cause for any concern. The Loan-to-Value (LTV) ratios for the gold loans are quite low, although we have a higher limit going up to even 85 per cent depending on the amount of loan. But the LTV ratios being maintained by the banks as well as the NBFCs are on the lower side,” said RBI Governor Sanjay Malhotra after the monetary policy.

 

According to recent RBI data, credit extended against loans on gold jewellery increased nearly 127.6 per cent year-on-year (Y-o-Y) in December 2025 to ₹3.82 trillion, compared with 84.6 per cent Y-o-Y growth in December 2024 to ₹1.68 trillion, largely due to the surge in gold prices.

 

Deputy Governor Swaminathan J said that the surge in gold loans need to be seen as a proportion of the total lending book. He noted that the increase in gold loan growth was not unexpected, as unsecured personal loans had played a major role in driving overall credit growth in previous years.

 

“We will have to see the gold loan as a proportion to the total lending book. Increase (gold loan) is not unexpected because primarily in the previous years the unsecured personal loans had a major role in terms of contributing to the overall growth. When there are higher slippages seen in certain segments like MFI or personal loans which are unsecured, banks move more towards safety and collateralized loans will see a pickup. There has been a shift but that has also been aided by the spurt in the gold prices,” Swaminathan said.

 

Gold prices have risen nearly 80 per cent year-on-year as of February 3, 2026.

 

In the previous financial year, lenders faced pressure due to higher exposure to unsecured loans, including personal loans and the microfinance sector, which saw asset quality stress and higher slippages. This led banks to focus more on secured lending and pare their exposure to unsecured portfolios. However, the surge in gold prices supported growth in lending against gold loans during the financial year.

 

Swaminathan said there was no cause for concern regarding gold loan growth, either in terms of its share of overall bank credit or the Loan-to-Value (LTV) ratio, which remains below 70 per cent at the system level.

 

“While slightly higher LTV have been permitted, at the system level, it is still below 70 per cent. There is absolutely no concern about gold loans as a percentage of the overall pie that it has in the bank credit and secondly, LTV levels are even comfortable at this point in time. So there is no worry,” Swaminathan J added.