Bajaj Finance and Piramal Finance have flagged early repayment stress in a rapidly expanding market, with some borrowers taking gold-backed loans while already in arrears elsewhere.
India’s booming market for loans backed by gold jewellery is beginning to show signs of strain, as two of the country’s large non-bank lenders flag rising repayment pressure and a worrying pattern of lending to borrowers already deep in arrears elsewhere.
According to Business Standard, Bajaj Finance and Piramal Finance have both pointed to early stress in a segment that has grown quickly on the back of elevated gold prices and strong demand for quick credit. The central concern is not that pledged jewellery has lost value as collateral, but that some borrowers appear to be using fresh borrowing against gold to keep up with overdue obligations to other lenders, rather than to improve their financial footing.
Piramal Finance offered one of the clearest warnings. Jairam Sridharan, the company’s managing director and chief executive, said on an earnings call that between 15% and 23% of gross gold loan disbursements across the industry in 2025-26 had gone to borrowers already more than 90 days overdue on at least one other loan. He estimated the value of such lending at ₹4.7 trillion. “It is a shockingly high number,” Sridharan said. He added that these borrowers accounted for less than 1% of Piramal Finance’s own gold loan disbursements so far in October, and said the company does not lend to customers who are more than 90 days past due. “Today, presence of a gold loan on file is not an indicator of higher risk on the portfolio, but these data points are worth noting and tracking,” he said.
The broader worry, analysts say, is that gold-backed lending can disguise underlying weakness if borrowers are merely rolling debt from one lender to another. Suresh Ganapathy, managing director and head of research at Macquarie Capital, said gold loans have become India’s second-largest retail lending category after mortgages, representing nearly 28% of the non-housing retail loan book. He said lenders need to look past the safety of the collateral and judge whether borrowers can actually service the debt. While gold jewellery may help limit losses, it does not remove the risk that households are becoming increasingly leveraged.
Bajaj Finance’s results pointed to a similar issue, though the company argued the problem was manageable. The lender, which has a gold loan book of about ₹24,000 crore, reported a rise in Stage 2 assets in the July-September quarter. In non-bank lending, Stage 1 loans are those up to 30 days overdue, Stage 2 loans are 31 to 90 days overdue, and Stage 3 assets are credit-impaired loans that are generally more than 90 days overdue and classified as non-performing assets. Bajaj Finance said ₹1,047 crore of the increase was linked to short-tenor gold loan schemes introduced after revised Reserve Bank of India guidelines took effect. It later stopped offering those schemes in August and said the deterioration was largely temporary.
Rajeev Jain, Bajaj Finance’s vice-chairman and managing director, said during the earnings call that the company prefers to act early when repayment problems emerge rather than rely on auctioning pledged gold after a loan has gone bad. “It’s better to manage it through risk rather than manage it through auction,” he said, while stressing that the lender remains committed to expanding the business. The company also said about ₹550 crore of the movement in Stage 2 and Stage 3 assets had already been resolved and shifted back into Stage 1.
The scale of the market explains why lenders are paying close attention. Reserve Bank of India data show that bank loans against gold rose 83% year on year to about ₹5.6 trillion as of August 31, 2026, while non-bank lenders’ gold loans increased 69% to roughly ₹3.6 trillion. In a separate assessment, India Ratings noted that repayment behaviour can vary sharply by customer type, with borrowers in smaller towns often relying on gold as a core household asset, while urban borrowers may use larger loans for working capital or income generation. That difference matters, because the ability to repay, and the level of existing indebtedness, can look very different across the two groups.
For now, delinquencies in the segment remain low and the collateral still offers lenders a degree of protection. But Macquarie’s Ganapathy warned that the comfort of secured lending could prove misleading if a sharp fall in gold prices were to coincide with a rise in defaults. In that scenario, a wave of auctions could strain recovery mechanisms and weaken the assumption that jewellery alone can absorb the shock. The deeper question, industry observers say, is whether the current boom in gold-backed credit is funding productive activity or simply allowing stressed borrowers to push existing debt further into the future.
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