Big Non-Banking Financial Companies (NBFCs) are now on a shopping spree. These large lenders are looking to buy smaller NBFCs that specialize in gold loans. They are also buying out the gold loan divisions of other diversified finance companies. This shift happens as the demand for loans against gold reaches new heights in the Indian market.

Recent deals show how serious this trend has become. Tata Capital Ltd (TCL) recently announced it will buy an 88.6% stake in Thrissur-based Yogakshemam Loans Ltd (Yogloans). The deal values the company at up to Rs 318 crore and includes a fresh capital injection of Rs 93 crore. Earlier in June 2025, L&T Finance (LTF) completed the purchase of the gold loan business from Paul Merchants Finance for Rs 711 crore through a slump sale (selling a business part as a whole for a lump sum).

The numbers explain why these big players are interested. By the end of May 2026, the gold loan portfolio of NBFCs grew by a massive 69.9% compared to the previous year. This is much higher than the 38.9% growth seen in May 2025. Rising gold prices and a focus on secured borrowing (loans backed by collateral like jewelry) are the main reasons for this surge.

Experts like Sanjay Agarwal from CareEdge Ratings explain that gold loans are a very safe asset class. Even though the opex (operating expenses or daily running costs) is high because you have to verify and store physical gold, the yields (interest income) are very good. This makes the gold loan business highly profitable for lenders who can manage the operations well.

There is a big difference between how banks and NBFCs handle gold loans. Banks usually give gold loans to their existing customers with large ticket sizes (high loan amounts) at lower interest rates of 9-11%. However, NBFCs focus on smaller customers with an average loan of Rs 1 lakh to Rs 1.5 lakh. These NBFCs have high pricing power, meaning they can charge 7% to 8% more interest than banks.

For bank officers and aspirants, this means competition is heating up. While banks have cheaper funds, NBFCs are faster and reach smaller customers who might otherwise go to local moneylenders. HDFC Securities notes that only 10% of household gold in India is currently used for loans. This means there is still a huge market left to capture.

Working in this sector requires high operational intensity. New players might take longer to reach a break-even point (the stage where income equals expenses) because setting up gold branches is expensive. However, large NBFCs believe that buying existing businesses is a faster way to grow than starting from scratch.

In the coming months, we should watch for more mergers and acquisitions in the gold finance space. As large players like Tata and L&T expand, smaller regional players in South India might become targets for buyouts. For customers, this could mean more professional service, while for bankers, it means staying alert to the aggressive marketing of NBFC competitors.