Bank loans against gold have emerged as the fastest-growing credit segment, surging 125% year-on-year to reach ₹3.50 lakh crore by November 2025, according to Reserve Bank of India data. This remarkable growth has been fueled by a significant rally in gold prices and the metal's enhanced collateral value, enabling borrowers to secure larger loans against their holdings.

Gold Price Rally Drives Loan Growth

The surge in gold loans coincides with a substantial price appreciation in the precious metal. Gold prices rose nearly 64% during 2025, reaching approximately ₹1.35 lakh per 10 grams of 24-karat gold. This price rally has directly translated into higher collateral values, making gold loans more attractive to both lenders and borrowers.

The growth trajectory of gold loans has been particularly impressive over recent periods:

Market Share Dynamics Shift

A notable development in the gold loan market has been the changing competitive landscape between banks and non-banking finance companies. Banks have now overtaken NBFCs in market share, holding 50.35% of the gold loan market, with the remainder accounted for by finance companies, according to RBI's latest Trends and Progress report.

Non-banking finance companies have also expanded their gold loan portfolios, with outstanding loans reaching ₹3.00 lakh crore according to industry estimates. Major players in the gold loan financing space include Muthoot Finance, Manappuram, and IIFL Finance.

Structural Credit Access Changes

"The sharp growth in gold loans reflects a structural shift in how small entrepreneurs and households access credit," said Manish Mayank, head of gold loan business at IIFL Capital. He emphasized that gold loans meet urgent, short-tenure working capital needs with speed, transparency, and minimal documentation requirements.

The secured nature of gold loans has created advantages for both parties involved:

• For lenders: Lower risk profile due to tangible collateral
• For borrowers: Affordable and flexible credit access
• Operational benefit: Minimal disruption to existing cash flows

Broader Credit Market Performance

While gold loans dominated growth, other credit segments showed varied performance. Vehicle loans climbed to ₹6.80 lakh crore by November-end, supported by GST cuts and festive offers, registering 11% growth. However, consumer durable loans contracted, likely due to the conclusion of festive season demand in October.

The combined gold loans of banks and NBFCs represented a 5.8% share in total outstanding loans as of September-end, according to RBI's Financial Stability Report. Trade sector credit showed the strongest growth at 14%, reaching ₹12.30 lakh crore, supported by government and RBI relief measures including loan moratoriums for exporters until December.

Gold prices began 2026 with strong momentum on Thursday, rising ₹640 to ₹1,38,340 per 10 grams in the national capital, according to the All India Sarafa Association. The yellow metal of 99.9% purity had previously closed at ₹1,37,700 per 10 grams on Wednesday. In contrast, silver prices extended their losing streak for the second consecutive day, declining ₹1,600 to ₹2,37,400 per kilogram from the previous close of ₹2,39,000 per kg.

Exceptional 2025 Performance

Both precious metals delivered outstanding returns during 2025, marking one of their strongest annual performances in recent years.

Silver significantly outperformed gold with its remarkable surge of approximately 164%, while gold's 73.45% gain also represented substantial appreciation for investors.

International Market Movements

In international markets, spot gold faced pressure and slipped $28, or 0.65%, to close at $4,310.89 per ounce on Wednesday. Praveen Singh, Head of Commodities at Mirae Asset ShareKhan, attributed this decline to rebounding US yields. "On the last trading day of the year 2025, spot gold closed with a loss at $4,310 per ounce as US yields rebounded," Singh noted, adding that international gold prices are expected to remain range-bound in the short term.

2026 Market Outlook

Market experts have identified several key factors that will likely influence precious metal prices throughout 2026. Rahul Kalantri, Vice-President of Commodities at Mehta Equities, outlined the primary drivers expected to shape the market:

• US Federal Reserve interest rate expectations
• Dollar strength or weakness
• Macroeconomic and monetary policy developments
• Geopolitical factors

Kalantri emphasized that continued central bank purchases and exchange-traded fund flows will provide structural support to precious metals. He noted that episodes of geopolitical or financial market stress will boost safe-haven demand for these assets.

Supply-Side Considerations

According to market experts, China's new curbs on silver exports are expected to significantly influence global supply dynamics and guide bullion prices in the near term. This development adds another layer of complexity to the precious metals market as supply constraints could potentially support price levels.

"Together, these factors will determine whether bullion stays near record highs or experiences volatility through the year," Kalantri concluded, highlighting the multiple variables that investors will need to monitor as the precious metals market navigates 2026.