A new report from Motilal Oswal shows that India's gold loan sector is growing for unexpected reasons. While the total money lent is rising fast, the actual amount of gold kept as security has not increased much. Instead, the growth is coming from higher gold prices and the same customers taking loans again and again. This is a big shift for bank officers and NBFC employees to understand.

For the two biggest players, Muthoot Finance and Manappuram Finance, the total gold held as collateral (security for the loan) has stayed at 260 to 265 tonnes for the last two years. Their total customer base has also stayed stuck at around 9 million people. Even though they are not getting many new customers or more gold, their AUM (Assets Under Management, which is the total value of loans given) has jumped because gold is now more expensive.

When gold prices go up, the value of the gold already sitting in the vault increases. This allows lenders to give 'top-up' loans to existing borrowers. The report shows that repeat customers accounted for 82% of new gold loans in 2025, up from 76% in 2022. Even more shocking, 90% of loan originations (new loan accounts opened) came from people who already had a gold loan. This means banks are relying heavily on the same group of people.

This trend brings a risk of 'overleveraging.' Overleveraging means a customer borrows more money than they can comfortably pay back, just because the value of their gold went up. If gold prices suddenly fall in the future, the value of the security might become less than the loan amount. This could lead to losses for the bank if the customer defaults (fails to pay back the loan).

Despite these worries, the current health of these loans is good. Early-stage delinquencies (loans where payment is late by a few days) for NBFCs improved to 0.56% in March 2026, compared to 2.15% in March 2025. This shows that for now, borrowers are keeping up with their payments. The total gold loan market in India has reached a massive ₹18.6 lakh crore as of March 2026.

Looking ahead, the report predicts the sector will grow by 28% every year until 2028. By March 2028, the total gold loan book in India could cross ₹30 lakh crore. For bank aspirants and officers, the lesson is clear: while the numbers look great, the lack of new customers and the reliance on gold price hikes is a risk. We must watch if lenders can start attracting new borrowers instead of just giving more money to the same ones.