Leading NBFCs are reporting signs of repayment stress in the gold loan segment. Bajaj Finance has halted short-term products following rising delinquencies, while Piramal Finance has flagged risks from borrowers holding multiple credit lines. This signals growing caution in a sector that has seen rapid growth.
The gold loan sector, which has seen explosive growth over the past year, is showing its first clear signs of stress. Major non-banking financial companies (NBFCs), including Bajaj Finance and Piramal Finance, have begun tightening their lending standards as they observe worsening repayment trends among their borrowers.
Bajaj Finance has taken the proactive step of discontinuing its short-term gold loan products. This decision comes after the lender reported a 15 basis-point increase in its stage 2 and stage 3 assets, which are loans overdue by more than 30 days, during the July-September quarter. For a retail-focused lender, this increase in overdue accounts is a direct trigger for a more conservative approach to product offerings.
Beyond individual lender data, the sector faces a structural challenge regarding borrower health. Piramal Finance has highlighted that gold loan applicants are increasingly juggling multiple debts. During a recent analyst update, the company noted that roughly 35% of its gold loan customers already held active credit lines with other lenders. This overlapping debt profile suggests that while gold remains a valuable and secure asset, the cash flow of the underlying borrowers may be stretched thinner than in previous years.
The industry has grown at a blistering pace, with bank gold lending rising 83% year-on-year to reach Rs 5.6 lakh crore by August 2026. Non-bank lenders have followed a similar trend, recording a 69% surge to reach Rs 3.6 trillion. While this volume growth is significant, it often brings credit quality risks. Industry data from the 2025-26 fiscal year indicates that nearly Rs 4.7 trillion in gold loan disbursements were extended to customers who already had accounts overdue by 90 days or more elsewhere in the system. This pattern suggests that credit is flowing to borrowers who are already facing financial difficulties.
Financial analysts are also noting the broader environment in which these lenders operate. Persistent inflation and the potential for regulatory restrictions on revolving credit from the Reserve Bank of India are creating a more complex environment. Lenders are now balancing the need for volume growth with the necessity of maintaining healthy loan books. For investors, the focus has shifted from simple volume expansion to asset quality preservation.
The immediate monitorable for shareholders will be how these NBFCs manage their existing loan books and whether other competitors follow suit with tighter underwriting standards. Investors may watch for future quarterly reports to see if these delinquency levels stabilize or continue to climb, as this will determine the profitability and long-term risk profile of the gold lending segment.