For thousands of borrowers navigating tight liquidity conditions and limited access to unsecured credit, gold loans are increasingly emerging as a trusted and secure way to raise funds without lengthy approval processes.
Riding this shift in customer behaviour, Muthoot Finance Ltd, the largest gold loan NBFC, has reported a record year in its core gold loan business.
Customers across segments, from salaried individuals and self-employed professionals to small business owners, are increasingly turning to gold-backed loans as a reliable credit solution.
Higher gold prices have further enabled borrowers to unlock greater value from their pledged jewellery, strengthening demand momentum, said Managing Director George Alexander Muthoot during earnings call.
According to him, the company’s standalone gold loan assets under management (AUM) surged by ₹50,000 crore, marking a 50% year-on-year growth in its core portfolio.
Over the nine-month period, standalone gold loan AUM rose by ₹36,700 crore to a record ₹1,39,658 crore, supported by strong festive season demand and sustained customer traction.
Muthoot emphasised that the AUM growth is driven primarily by demand rather than gold prices. The company’s loan-to-value (LTV) ratio currently stands at 57%, well below the regulatory ceiling of 75%, indicating that customers are borrowing prudently despite elevated gold prices.
While rising prices may encourage some to monetise their holdings, he noted that underlying credit demand remains the key growth driver.
He attributed the surge in gold loan demand partly to tighter access to unsecured loans and the slowdown in the microfinance sector, prompting borrowers to increasingly leverage gold collateral to meet funding needs.
With nearly 5,000 branches under Muthoot Finance and around 1,000 branches under Muthoot Money, the lender said it is well positioned to tap further opportunities in the gold loan space.
Welcoming the Reserve Bank of India’s draft proposal allowing firms to open branches without prior approval, Muthoot said the move would significantly ease expansion.
“We can open the branch and inform them that the branch is open. That’s a big convenience factor. The regulatory change would support faster network growth. However, it would again depend on the business environment and whether we need to open branches. Not that, we are going to open 1,000, 2,000 branches tomorrow. It’s not that easy to open,” he concluded.