Indian Lenders Flag Early Stress in Fast-Growing Gold Loan Portfolios

Two of India's largest non-bank lenders warned this week that the country's fastest-growing retail credit segment is beginning to show strain. Bajaj Finance and Piramal Finance, reporting results for the July to September quarter, both pointed to repayment delays and borrower overleverage in gold loan portfolios, a market that banks and shadow lenders have expanded rapidly in the past year.

A lending boom built on jewelry collateral

Lenders have rushed into gold-backed credit because the collateral is seen as secure and easy to recover. Reserve Bank of India data showed that bank loans against gold rose 83 percent year on year in August 2026 to 5.6 trillion rupees. Loans against gold at non-bank financial companies rose 69 percent to 3.6 trillion rupees as of August, separate central bank figures showed. Suresh Ganapathy, managing director and head of research at Macquarie Capital, said gold has become the second-largest retail lending category after mortgages, accounting for nearly 28 percent of the non-housing retail loan book.

The concerns surfaced on earnings calls. Jairam Sridharan, managing director and chief executive officer of Piramal Finance, said that in the 2025-26 financial year between 15 percent and 23 percent of gross gold loan disbursements across the industry went to borrowers who were more than 90 days overdue on at least one of their other outstanding loans. The amount of such disbursements was estimated at 4.7 trillion rupees. Sridharan called the figure shockingly high, while noting that the share in his own company's portfolio was below 1 percent so far in October. Piramal Finance does not lend against gold to borrowers more than 90 days past due, he said.

Sridharan added that the presence of a gold loan on file is not currently an indicator of higher portfolio risk, but that the data points deserve tracking. The disclosure has drawn attention to a possible weak spot in gold-backed lending: borrowers in difficulty may be pledging jewelry with one lender to clear overdue payments with another, without any real improvement in their ability to service debt. Nearly 35 percent of Piramal Finance's customers already had a gold loan from another institution, he said.

Bajaj Finance tightens short-term products

Bajaj Finance, which holds a gold loan portfolio of 240 billion rupees, about 2.54 billion dollars, flagged a rise in loans overdue by more than 30 days in its quarterly results. Assets classified as stage 2 and stage 3 rose 15 basis points from the previous quarter, and the lender said a large part of the increase came from short-term gold loans, a product it has now stopped offering. The non-bank lender still reported a nearly 30 percent year-on-year rise in consolidated profit after tax. Its shares were trading 3.2 percent lower at 926.80 rupees in afternoon trade, while the benchmark Nifty 50 index was down 0.6 percent.

Analysts also cited rising inflation, possible central bank curbs on revolving credit and tighter commission rules from the insurance regulator as risks for the lender. Delinquencies in gold lending remain low overall, and both companies described the signals as early rather than acute.

What it means for lending careers

The disclosures put a sharper focus on the skills that underpin gold loan portfolios, from collateral valuation and loan processing operations to credit underwriting and collections. Lenders that grew books quickly now face pressure to tighten screening, track borrowing across multiple institutions and report asset quality more precisely. That is likely to lift demand for analysts who can read repayment data, for compliance staff who document know-your-customer and collateral checks, and for collections teams that manage early arrears before they migrate into higher-risk buckets.

Watch for the next set of central bank data on gold-backed credit and commentary from other lenders as they report December quarter results. Bajaj Finance's decision to withdraw short-term gold loans will be a test case: if early arrears ease in coming quarters, other lenders may follow with similar product limits. If overdues keep climbing while disbursements stay high, supervisors are likely to ask harder questions about how quickly the market has grown and who is absorbing the risk.