Non-bank lenders warn of emerging strain in India's gold loan market

Bajaj Finance and Piramal Finance have flagged early stress signals in their expanding gold loan portfolios, citing rapid loan growth and rising repayment delays. Piramal Finance disclosed that between 15% and 23% of industry-wide gold loan disbursements went to borrowers overdue on other loans, amounting to roughly ₹4.7 trillion, though its own exposure remains below 1%. The firm does not issue gold loans to borrowers more than 90 days past due.

Bajaj Finance reported an increase in Stage 2 assets during the July-September quarter, largely due to short-tenure schemes launched after RBI’s revised guidelines, which it later halted. The lender emphasized managing risk proactively rather than relying on gold auctions. Experts warn that borrowers may be using new gold loans to service existing debt, and a sharp fall in gold prices combined with higher defaults could challenge the sector’s reliance on collateral.