India’s Massive Gold Loan Craze: In India, gold is not just worn as jewellery or kept as an investment in lockers; it is also one of the most widely used assets for raising money during financial needs. The country’s gold loan market currently stands at around ₹18.62 lakh crore. Interestingly, South India dominates this market. Official data presented in Parliament shows that nearly 75% of the country’s total gold loan exposure comes from five southern states. Gujarat, despite being a major hub for the gold trade, remains far behind in gold loan borrowing. Differences in financial habits and borrowing patterns across states are believed to be a major reason for this gap.
South India Leads the Gold Loan Market
According to RBI and Public Sector Bank (PSB) data as of March 31, 2026, southern states dominate gold lending in India.
- Tamil Nadu: ₹4,11,656 crore — highest in the country
- Andhra Pradesh: ₹2,22,953 crore — second
- Karnataka: ₹98,962 crore — third
- Telangana: ₹92,394 crore — fourth
- Kerala: ₹83,657 crore — fifth
Including Non-Banking Financial Companies (NBFCs), the combined gold loan exposure of these five states is estimated at around ₹13.94 lakh crore.
Why Is Gujarat Behind Despite Its Huge Gold Trade?
Gujarat has a large gold-refining, jewellery-manufacturing and gold-trading ecosystem. However, people in the state appear to rely much less on gold loans compared with Tamil Nadu and Andhra Pradesh.
- Outstanding gold loans with Gujarat’s public sector banks: ₹23,381 crore
- Southern India: Gold is frequently pledged to meet agricultural requirements, expand small businesses or manage short-term cash-flow needs.
- Gujarat and other western states: Business owners and individuals are more likely to rely on business loans, trade credit, equity or other conventional financial instruments instead of pledging gold.
State-Wise Gold Loan Ranking by Public Sector Banks
According to official bank data as of March 31, 2026, the top eight states are:
| Rank | State | Outstanding PSB Gold Loans |
|---|---|---|
| 1 | Tamil Nadu | ₹4,11,656 crore |
| 2 | Andhra Pradesh | ₹2,22,953 crore |
| 3 | Karnataka | ₹98,962 crore |
| 4 | Telangana | ₹92,394 crore |
| 5 | Kerala | ₹83,657 crore |
| 6 | Maharashtra | ₹45,710 crore |
| 7 | Gujarat | ₹23,381 crore |
| 8 | Uttar Pradesh | ₹21,745 crore |
RBI Says Gold Loans Remain Relatively Safe
In response to a question in Parliament about the rapid growth of gold loans, Minister of State for Finance Pankaj Chaudhary said that, based on the RBI’s assessment, the gold loan sector remains safe and does not pose any major systemic risk.
- Higher gold prices: Rising global gold prices have reduced loan-to-value (LTV) ratios, providing an additional cushion to lenders.
- Lower defaults: Gold-loan gross NPAs have declined over the past four years. As of March 2026, gross NPAs on gold loans at commercial banks had fallen to 0.12%, from 0.19% in 2023. For NBFCs, the figure declined from 2.32% to around 0.81%.
- Not India’s second-largest retail loan: The government clarified that gold loans are not India’s second-largest retail loan category. Housing loans remain the largest, followed by personal and vehicle loans.
Strict Rules to Protect Gold Loan Customers
The sector is also governed by RBI rules aimed at protecting borrowers. Key safeguards include:
- Gold auctions must maintain a minimum 90% reserve price.
- Borrowers must be informed in advance before pledged gold is auctioned.
- Any surplus amount received from an auction must be returned to the borrower.
- Compensation must be paid if the pledged gold is not returned within the prescribed timeframe.
