High borrowings against gold jewellery reflect in part the surge in the value of the yellow metal, which climbed 36% in dollar terms on a rolling 12-month basis. Furthermore, a shift in the nature of borrowing – from the erstwhile last resort to the use of gold as a temporary liquidity tool – has cast the net wide for this loan type, commentators said.
This surge helped the overall retail loan market expand 17% year-on-year to ₹170 lakh crore, according to the credit information company’s report on How India Lends.
“This growth was accompanied by improvement in portfolio performance, with delinquency levels declining across most segments, reflecting strengthening asset quality alongside sustained expansion,” the report said.
“At the same time, portfolio growth continued to outpace active loan growth, indicating a structural shift toward higher ticket sizes,” it added, highlighting continued premiumisation across products and a continued shift toward collateral-led secured lending.
While norms allow lenders across the spectrum to lend between 75% and 85% of the gold value being pawned, the industry practice is to advance less money than the theoretical outer limit allowed by the regulator. Hence, the loan to value ratio is lower than the maximum allowed.
To be sure, there has been a moderation in post-festive spending in categories such as vehicle financing and consumer durables. Auto loan origination declined 11.6% quarter-on-quarter, while two-wheeler loans fell 22.1% after a festive surge.