MC EXCLUSIVE RBI closely monitoring lenders’ positions on gold loan portfolios, say sources

Gold

• Gold prices fell sharply, prompting regulator scrutiny of gold loan practices
• Gold loan portfolios surged, driven by price hikes, not increased gold pledged
• NBFCs like Muthoot and Manappuram saw stock declines amid gold price volatility

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After hitting new highs, gold has finally reached its moment of truth. Plummeting from an all-time high of Rs 1.83 lakh per 10 grams to Rs 1.54 lakh per 10 grams in the last three trading days, the sharp depreciation in gold has necessitated the regulator's attention and need for closer monitoring on gold loan players. While on Monday's trade, the yellow metal saw some recovery, it still warrants increased oversight, say sources.

The reason for concern is two-fold: the sharp surge in the outstanding gold loan portfolio and the much of the growth being front loaded by an increase in gold prices rather than an increase in tonnage of gold pledged with lenders. The shifting preference of lenders from unsecured loans to gold-backed loans, especially in the smaller ticket sizes is also a cause of concern.

For instance, data published by India's top gold financiers - Muthoot Finance and Manappuram Finance suggest that the gold assets under management (AUM) for the former stood at Rs 1.25 lakh crore for the second quarter, recording a 40% on a year-on-year basis. Smaller peer Manappuram’s gold AUM stood at Rs 38,754 crore in the third quarter, posting a 58.2% growth from the prior corresponding period.

On the whole, bank loans against gold jewellery have surged to Rs 3.83 lakh crore, an whooping 86% rise during the financial year, according to latest data from the RBI report of sectoral deployment of bank credit.

"We are at the peak of the gold loans business," said a senior executive of a NBFC who didn't want to be named, adding that the downturn in the market conditions was waiting to happen. "Any lending business is subject to a lot of cyclicality. When you lend against a commodity, the cyclicality tends to be higher," he added.

Sources also point out that the practice of top-up loans against the same collateral was found increasing in the last 12 months. "It became particularly visible with smaller ticket sized loans and the ongoing cycle will indicate how many lenders are comfortable on the LTV front," said a banker who didn't want to be named. On October 23, 2025, Moneycontrol reported that lenders are getting cautious on gold loan borrowing limits

Loan to value or LTV on gold loans ranges from 75 - 85 percent depending on the quantum of loan. For loans less than Rs 2 lakhs, the LTV is 85 percent, while for loans above Rs 5 lakhs, it stands at 75 percent.

The RBI is also monitoring whether the sharp fluctuations in gold prices is resulting in higher delinquencies as the available lending limits would automatically shrink necessitating pre-payment or part-repayment of loans. "Are delinquencies and auctions of gold piling on is something that will be closely monitored especially after the recent price movements," said a source cited above.

Stock prices of gold-loan focussed NBFCs such as Muthoot Finance and Manappuram Finance have come under pressure in the recent trading sessions, having lost 8 percent and 6 percent respectively in the last three days of trading sessions.