Pace of gold loan expansion slows as banks adjust to new regulations
Bank gold loans grew significantly, though at a slower pace. Personal loans also saw increased growth, driven by housing and vehicle financing. New regulations adjusted loan-to-value ratios and repayment tenures for gold loans. Housing and vehicle loans experienced notable year-on-year increases in their outstanding amounts. Overall bank credit expanded robustly, with services sector leading the…
Kolkata: The expansion of gold loan lending by banks has begun to decelerate amid the banks adjusting to new regulatory measures introduced by the Reserve Bank of India (RBI). Despite this slowdown, the year-on-year growth in gold loans reached an impressive 88.1% up to July 31, a significant drop from the 136.4% observed a year ago.
The total outstanding gold loans held by banks do not encompass gold-backed agriculture loans, as these are classified under the agriculture loans category, with the exception of one bank. The broader personal loan segment, however, witnessed a robust 16.2% year-on-year growth, driven by an upturn in housing loans and vehicle loans.
The RBI implemented a standardized gold loan framework on April 1, 2026, limiting the repayment tenure for consumption-focused bullet repayment loans to a maximum of 12 months. Additionally, the lender-to-value (LTV) ratio for gold loans was revised from a uniform 75% to a tiered structure, based on the loan size: up to 85% for loans under Rs 2.5 lakh, 80% for loans between Rs 2.5 lakh and Rs 5 lakh, and 75% for amounts exceeding Rs 5 lakh.
In contrast, housing loans, including priority sector loans, expanded by 11.3% to Rs 34.3 lakh crore, while vehicle loans grew by 18.8% to Rs 7.65 lakh crore at the end of July 2024. The growth rates for housing and vehicle loans were 9.6% and 8.9% respectively a year prior. Overall, bank credit increased by 19.3% year-on-year to Rs 220.8 lakh crore by the end of July 2024.
Among the four major sectors, credit to the services sector recorded the highest growth rate at 22.9%, followed by industry with a 20% growth, and agriculture and allied activities at 17% growth, as reported by the RBI.
Written by urgent.news from The Economic Times - Top News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
