Gold loan fastest growing segment

MUMBAI: Gold loans surged by 71% year-on-year in Dec-end, emerging as the fastest-growing segment within personal loans. Individual borrowings against FDs and shares saw a year-on-year increase of 19% and 22%, in Dec 2024.

According to data on sectoral deployment of bank credit released by RBI, gold loan portfolio of banks rose to Rs 1.7 lakh crore as on Dec 27, 2024. This reflects a 71% increase from the previous year and a 68.3% rise in the current financial year.

Analysts attribute the growth in this segment to three main factors. First, a shift from non-banking financial companies (NBFCs) to banks, driven by regulatory changes, has enabled banks to capture 82% of the market share, compared to 18% held by NBFCs as of Oct. Second, rising gold prices have allowed borrowers to unlock more value from their gold, securing larger loans. Third, financial distress among households has led many to opt for secured loans against gold, as personal loans remain sluggish.

In the broader personal loan segment, credit card outstandings grew by 15.6% to Rs 2.9 lakh crore. Home loans remained the largest segment in bank credit with an outstanding of Rs 29.3 lakh crore, though growth slowed to 11.1% year-on-year. Consumer durables are the only segment which showed a negative growth, albeit a modest 1.1%.

RBI data showed that non-food credit, which stood at Rs 172.5 lakh crore as of Dec 2024, saw an 11.1% overall increase. The agriculture sector contributed 12.5% to this growth, with an addition of Rs 1.67 lakh crore. The personal loan segment grew marginally slower at 12%, but it made the highest contribution to credit growth due to its larger size - Rs 58 lakh crore - resulting in an addition of Rs 4.6 lakh crore over the past 12 months. Credit growth in the industrial sector, which stood at Rs 38.5 lakh crore, remained sluggish at 7.2%. Large industries saw 5% increase in borrowing.