NBFCs’ gold loan rush faces a stress test

Shriram Finance has joined its NBFC peers in reporting pressure in the segment. Its gross Stage 3 assets — loans overdue by more than 90 days — rose to 3.12% of its gold loan portfolio in the second quarter of this fiscal, from 2.57% in the previous quarter and 2.28% a year earlier. Gross Stage 2 assets, comprising loans overdue by 31-89 days, rose to 9.88% from 9.71% in the year-ago quarter.

Umesh Revankar, executive vice-chairman of Shriram Finance, attributed the rise in delinquencies to changes in the repayment structure. “We had introduced EMI and interest servicing gold loans. People are habituated to servicing only bullet repayment. We are trying to introduce the new structure because they can get a little more loan if they opt for EMI and interest,” Revankar said during the second-quarter earnings call.

Despite the increase in delinquencies, Shriram Finance plans to more than double its gold loan portfolio to ₹20,000 crore over the next two-three years and double its share of gold loans to 5% of total assets. “We don’t really see any challenge, and we feel that opportunity in gold loan is very high,” Revankar said.

His optimism is in stark contrast with concerns raised by other lenders. Bajaj Finance and Piramal Finance last week flagged repayment delays and the growing practice of extending gold loans to borrowers who are already more than 90 days overdue on loans from other financial institutions.

Jairam Sridharan, MD and CEO of Piramal Finance, said 15-23% of gross gold loan disbursements over the past year had gone to customers who were more than 90 days past due on at least one of their existing loans. In 2025-26, the industry had disbursed gold loans worth Rs 4.7 lakh crore to customers who are in deep delinquency, i.e., more than 90 days past due, he said.

Bajaj Finance reported an increase in Stage 2 assets in the July-September quarter. The company attributed ₹1,047 crore of the increase to short-tenure schemes introduced after the Reserve Bank of India’s revised gold loan guidelines came into effect.

The emerging stress comes as a growing number of NBFCs diversify lending portfolios by introducing or expanding gold loans, attracted by rising prices, the security offered by the underlying collateral and the formalisation of the market. More than half a dozen NBFCs, including Tata Capital, Aditya Birla Capital, Shriram Finance, L&T Finance, Godrej Finance and Chola Finance, have announced forays or plans for rapid expansion in the segment over the past two years.

India’s organised gold loan market has nearly quadrupled over the past five years to ₹18.6 lakh crore as of March 2026, making it the second-largest asset class in retail lending.

IIFL Finance, which has more than half of its ₹1.24-lakh-crore loan book in gold loans, has also reported a rise in early delinquencies. Its Stage 1 gold loan assets, comprising loans overdue by up to 30 days, rose to 7.1% from 4.5% in the previous quarter, while loans overdue by more than 90 days edged up to 0.9% from 0.6%. Managing director Nirmal Jain attributed the rise in non-performing assets to gold price corrections in the current quarter being lower than in the previous quarter.

“These are actually small customers and some of them are not able to pay on time. Historically, we have seen these kinds of variations happening, but losses will be minimal because we have the collateral,” he said.