Gold-loan sector’s asset high quality has improved steadily over the previous three years, with dangerous loans declining at the same time as banks and non-banking monetary firms (NBFCs) ramp up lending towards jewelry, the federal government instructed the Lok Sabha on August 10.
The gross non-performing asset (GNPA) ratio for gold loans of scheduled industrial banks (SCBs) fell from 0.19 p.c as on March 31, 2023, to 0.12 p.c as on March 31, 2026, minister of state for finance Pankaj Chaudhary mentioned in a written reply.
For NBFCs, the development was sharper — the GNPA ratio dropped from 2.32 p.c to 0.81 p.c in the course of the interval, in response to knowledge compiled from the Reserve Financial institution of India (RBI).
The minister was responding to a query from CM Ramesh on whether or not the speedy progress in gold lending posed threat to monetary stability and if 5 southern states accounted for 75 p.c of the nation’s excellent gold loans of Rs 18.62 lakh crore as on March 2026.
Tamil Nadu leads in gold loans
The federal government mentioned RBI doesn’t keep state-wise knowledge on excellent gold loans however figures collected from public sector banks (PSBs) confirmed Tamil Nadu with the biggest publicity at Rs 4.11 lakh crore, adopted by Andhra Pradesh at Rs 2.23 lakh crore, Karnataka at Rs 98,962 crore, Telangana at Rs 92,394 crore and Kerala at Rs 83,657 crore, as on March 31, 2026.
On systemic threat, the minister cited RBI’s Monetary Stability Report of June, which discovered that the expansion in gold loans had been supported by rising costs of the valuable steel.
“Mortgage-to-value (LTV) ratios throughout Banks and Non-Banking Monetary Corporations (NBFCs) have declined regardless of progress in gold lending, thereby strengthening collateral buffers and enhancing lenders’ resilience to actions in gold costs,” the reply mentioned, including asset high quality within the gold- mortgage portfolio “stays steady”.
The minister additionally mentioned gold loans have helped prolong formal credit score to rural and underserved debtors, together with micro, small and medium enterprises (MSMEs), defending them from “usurious and prejudiced mortgage covenants” that unorganised lenders might impose.
Housing loans nonetheless the biggest retail product
On whether or not gold loans have overtaken different retail credit score merchandise, the federal government mentioned housing loans stay the biggest phase as on March 31, 2026, adopted by private loans and car loans.
On regulatory safeguards, the minister pointed to RBI’s Instructions on Lending Towards Gold and Silver Collateral issued in June 2025, which harmonised lending norms throughout banks, co-operative banks and NBFCs.
The framework mandates prudent LTV norms, standardised valuation of gold collateral, ample discover earlier than public sale, a reserve worth of not less than 90 p.c of the collateral’s present worth and refund of any surplus after adjustment of dues. It additionally requires upfront disclosure of prices, standardised documentation and compensation for delays in releasing pledged collateral, the reply mentioned.
