India gold loan market grows amid rising prices and repeat borrowing

India's gold loan market is experiencing significant growth, though the drivers behind this expansion vary by provider. A report from Motilal Oswal indicates that much of the recent growth in assets under management (AUM) is being fueled by surging gold valuations and repeat borrowing rather than the acquisition of new customers or increased physical gold pledges. The report highlights a potential risk of overleveraging, noting that repeat customers accounted for 82 per cent of gold loan originations in 2025, rising from 76 per cent in 2022.

In contrast, Manappuram Finance reported robust growth that includes both price benefits and volume increases. The company's consolidated AUM reached ₹69,635 crore at the end of Q1 FY27, a 57 per cent year-on-year increase. Unlike the broader trend noted by Motilal Oswal, Manappuram's gold-loan AUM rose 97.9 per cent, supported by an 18.3 per cent increase in gold tonnage and a 10.5 per cent growth in its customer base, including approximately 3.2 lakh new gold-loan customers during the quarter.

Rising gold prices impact the loan-to-value (LTV) ratios for these lenders. Higher prices increase the collateral cushion and lower the LTV, while falling prices can increase the LTV even without additional borrowing. Manappuram Finance reported an average gold-loan LTV of 65.6 per cent for Q1 FY27.