Gold Loans to Hit Rs 10 Lakh Cr by FY25: Icra

Mumbai, Sep 25 (PTI) Gold loans by banks and non-bank lenders are set to breach the Rs 10 lakh crore milestone by the end of FY25, a report said on Wednesday.

The quantum of such loans will cross Rs 15 lakh crore by the end of FY27, the report by Icra Ratings said.

Contrary to concerns expressed earlier, the RBI's directions restricting cash disbursements on loans more than Rs 20,000 have not impacted business significantly as entities have been able to adapt to the new requirement, it said.

Banks remain a dominant force in the gold loan market, driven by their gold jewellery-backed agriculture loans, while NBFCs have the pole position when it comes to retail gold loans, it said, adding that the non-bank portfolios are set to expand by 17-19 per cent.

There has been some moderation in the yields for lenders due to the competitive intensity, it said, estimating that there will be a decline of up to 3 percentage points when compared to the peak achieved four years ago.

In the four years ending FY24, the overall gold loans achieved a compounded annual growth of 25 per cent, which included 26 per cent growth for banks and 18 per cent for non-banks.

Public sector banks (PSBs) accounted for about 63 per cent of the overall gold loan market in March 2024, up from 54 per cent in March 2019, while the NBFC and private banks' shares moderated by equal measure during this period, it said.

"With intensifying headwinds for unsecured loans, resulting in lower growth vis-a-vis the previous fiscal, and supported by buoyant gold prices, the NBFC gold loan book growth revived in FY24 and the trend is expected to continue into FY25," its co-group head for financial sector ratings AM Karthik said.

The growth in the NBFCs gold loan book is largely driven by the gold prices as the branch additions, it said, adding that the tonnage of gold jewellery held as collateral grew at the modest pace of 3-4 per cent against an 18 per cent growth in the loan book during FY2020-FY2024 for the large players.

The agency said the lending is concentrated when it comes to the NBFCs as the top four players command an 83 per cent market stake.