Gold Loan Market Likely To Hit Rs 14.19 Lakh Crore In 5 Years: PwC India

Indian families hold vast amounts of gold, estimated at around 25,000 tonnes. The total value of this gold, currently owned by households, is approximately Rs 126 lakh crore, according to the report

India's organised gold loan market is likely to double over the next five years, reaching Rs 14.19 lakh crore, according to a PwC India report. This growth comes despite anticipated regulatory changes that may moderate the pace of expansion. The report, titled 'Striking Gold: The Rise of India’s Gold Loan Market,' highlights that the market achieved a significant valuation of Rs 7.1 lakh crore in fiscal year 2023-24.

"It is expected to reach around Rs 14.19 lakh crore by FY 2029 at a five-year CAGR of 14.85 per cent," the report said.

Indian families hold vast amounts of gold, estimated at around 25,000 tonnes. The total value of this gold, currently owned by households, is approximately Rs 126 lakh crore, according to the report.

It also notes that the gold loan market is expected to experience moderate growth over the next two years. This is due to increased scrutiny from regulatory authorities concerning loan-to-value (LTV) ratios and auction procedures for gold loans. "The second-largest player in the gold loan market being inactive would have an impact on market growth in FY25," the report said.

Additionally, the RBI’s advisory limiting cash disbursements by NBFCs to Rs 20,000 may drive customers to turn to the unorganised sector for their needs. The regulator has also expressed concerns about the evaluation processes for lending activities conducted through fintech startups.

According to PwC, the heightened regulatory scrutiny and new guidelines have resulted in a decline in the share prices of major NBFCs. "Gold loan lenders are expected to use this period to ensure that they are compliant with all regulatory guidelines while undertaking several measures to optimise their middle and back offices through digitisation initiatives," it said.

Lenders are anticipated to pursue cost optimisation strategies to boost their bottom-line profitability and restore investor confidence, which has gone down due to increased regulatory scrutiny.

Additionally, the report notes that rising gold prices over the past financial year may lead lenders to adopt a more cautious stance on lending rates and pricing. A decline in gold prices could significantly breach loan-to-value (LTV) ratios, potentially causing operational challenges for lenders, including issues related to auctions.

"The growth of the gold loan market is expected to be steered by both banks and NBFCs," the report said.