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The organised gold loans by banks and non-banking financial companies (NBFCs) are set to exceed Rs 10 lakh crore in the current fiscal, with a projection to reach Rs 15 lakh crore by March 2027, a report showed on Wednesday. 

Rating agency ICRA said that banks remain dominant driven by their gold jewellery-backed agriculture loans. Public sector banks (PSBs) accounted for about 63 per cent of overall gold loans in March 2024, up from 54 per cent in March 2019, while the NBFC and private banks’ shares moderated by equal measure during this period.

At the same time, NBFCs hold the pole position in retail gold loans and are expected to expand at 17-19 per cent in FY25, the report mentioned.

Over the recent past, NBFC gold loans growth trends were influenced by the trends demonstrated by other loan products, like micro-finance, unsecured business or personal loans, which are also targeted at similar borrowers.

“With intensifying headwinds for unsecured loans, resulting in lower growth vis-a-vis the previous fiscal, and supported by buoyant gold prices, the NBFC gold loan book growth revived in FY24 and the trend is expected to continue into FY25,” said AM Karthik, Co-Group Head, Financial Sector Ratings, ICRA.

Overall, the organised gold plans market expanded at a compounded annual growth rate (CAGR) of 25 per cent over the period FY20-FY24, driven by banks, which expanded these loans at a higher CAGR of 26 per cent, while the NBFCs expanded theirs at 18 per cent during the same period.

Bank gold loans growth was driven by agriculture loans backed by gold jewellery, which grew at a CAGR of 26 per cent during FY20-FY24, while their retail gold loans grew by 32 per cent on a lower base, the report noted.

ICRA expects NBFC gold loans to expand at 17-19 per cent in FY25 and projects it to grow at a CAGR of 14-15 per cent during FY26-FY27.