Gold‑backed lending has become the surprise growth engine of India’s retail credit market, outpacing almost every other loan category. RBI data shows that outstanding loans against gold jewellery in banks’ books jumped about 128.5 percent year on year to roughly ₹3.38 lakh crore by October 2025, accounting for nearly one fourth of the entire increase in personal loans over the past twelve months. For middle‑class families and MSME owners heading into 2026, this means gold loans are no longer a last‑resort product but a mainstream way to unlock liquidity, smooth cash flow and reduce reliance on high‑cost unsecured credit.
Why gold loans have exploded in 2025
Several powerful trends have converged to push gold loans into the spotlight. Rising gold prices have lifted the value of existing jewellery collateral, allowing borrowers to access higher ticket sizes without adding new security, while regulatory reclassification has moved many agriculture‑backed gold loans into the retail bucket, making growth look even more dramatic in official data. ICRA now estimates that the organised gold loan market, including banks and NBFCs, could reach around ₹15 lakh crore by March 2026 and continue expanding toward roughly ₹18 lakh crore by FY27 if current momentum holds.
Equally important is a change in borrower behaviour. Studies show that households and small businesses increasingly prefer short‑tenure, collateralised loans over long unsecured personal loans when they need quick cash for working capital, medical costs, education gaps or business opportunities. With minimal documentation, fast disbursal and typically lower annual rates than unsecured credit, gold loans have become a practical first choice for many middle‑income and self‑employed borrowers who would earlier have reached for credit cards or app‑based personal loans.
“When incomes are uncertain but gold is certain, people will always borrow against certainty.”
What this means for middle‑class and MSME borrowers in 2026
For middle‑class borrowers, the boom in gold lending creates both an opportunity and a responsibility. Used well, pledging jewellery for a short, well‑planned tenure can solve temporary cash gaps at a lower cost than revolving card debt or high‑APR personal loans, and it keeps the option open to refinance into a longer‑term home, education or business loan once income stabilises. For MSME owners, specialised gold loan products with flexible repayment schedules, daily or monthly instalments and ticket sizes aligned to working capital cycles are turning idle gold into a functional business asset that can be recycled again and again.
However, triple‑digit growth also attracts closer regulatory attention and raises the risk of over‑leveraging for borrowers who treat gold as an endless ATM. Advisors who understand both unsecured and secured products can help families and MSMEs choose the right loan to value ratio, map repayment to cash flows and decide when to shift from repeated short gold loans into more stable term finance. In a 2026 credit market where gold loans are set to remain a leading growth segment, the most successful borrowers will not be those who pledge the most gold, but those who use this powerful tool sparingly, strategically and always with a clear exit plan.
