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Credit rating agency ICRA in its latest report has said that the organised gold loans (GL) by banks and non-banking financial companies (NBFCs) are likely to exceed Rs 10 trillion in the current financial year (FY25) and are set to reach Rs 15 trillion by March 2027. It highlighted that banks remain dominant driven by their gold jewellery-backed agriculture loans. At the same time, NBFCs hold the pole position in retail gold loans and are expected to expand at 17-19% in FY25. The moderation in competitive intensity is leading to some expansion in the loan yields of the NBFCs, however their yields are expected to be lower by 200-300 bps than the peak levels seen 4-5 years back.

The rating agency said overall organised GL expanded at a compounded annual growth rate (CAGR) of 25% over the period FY20-FY24, driven by banks, which expanded these loans at a higher CAGR of 26%, while the NBFCs expanded theirs at 18% during the same period. Bank GL growth was driven by agriculture loans backed by gold jewellery, which grew at a CAGR of 26% during FY20-FY24, while their retail GLs grew by 32% on a lower base. Consequently, the share of the NBFCs reduced during this period, which were largely focussed on retail GLs for consumption or business purposes.

According to the report, public sector banks (PSBs) accounted for about 63% of the overall GL in March 2024, up from 54% in March 2019, while the NBFC and private banks’ shares moderated by equal measure during this period. The NBFCs, however, continue to hold a stable share in the retail GL over the last 3-4 years. ICRA expects NBFC GL to expand at 17-19% in FY2025 and projects it to grow at a CAGR of 14-15% during FY2026-FY2027.