Bajaj Finance and Piramal Finance Flag Early Signs of Stress in Fast-Growing Gold Loan Market — October 22, 2026

India's gold loan segment, which experienced a blistering pace of expansion over the past year, is exhibiting early signs of borrower strain. Prominent non-banking financial companies (NBFCs), including Bajaj Finance and Piramal Finance, have highlighted emerging asset quality concerns linked to loan rollovers, borrower leverage, and credit recycling.

According to the latest Reserve Bank of India (RBI) data, bank lending against gold jewellery surged 83% year-on-year to ₹5.6 trillion in August 2026. For NBFCs, gold loan portfolios expanded 69% year-on-year to reach ₹3.6 trillion during the same period. Lenders aggressively scaled this collateralised segment, treating gold backing as a safe harbour amid broader concerns around unsecured consumer credit.

Borrower Stress and Debt Substitution

Disclosures made during second-quarter corporate earnings calls show that part of the credit growth may have masked underlying financial strain among retail borrowers.

Jairam Sridharan, Managing Director and Chief Executive Officer of Piramal Finance, revealed that between 15% and 23% of gross gold loan disbursements across the industry over the past year were extended to borrowers who were already more than 90 days overdue on at least one other outstanding credit facility. Sridharan estimated the value of such disbursements across the industry at roughly ₹4.7 trillion.

The phenomenon suggests that delinquent retail borrowers have been pledging family gold to service existing debt obligations rather than deploying funds for productive or consumption needs. While Piramal Finance reported that borrowers with 90-plus days overdue accounted for less than 1% of its own gold disbursements due to strict internal filters, the broader systemic prevalence points to cross-leveraging risks.

Lenders Tighten Portfolio Standards

Bajaj Finance, which holds an active gold loan book worth ₹24,000 crore, reported an increase in Stage 2 and Stage 3 assets—reflecting accounts overdue by more than 30 days—by 15 basis points sequentially in the July-September quarter. The lender’s Stage 2 and Stage 3 assets increased by ₹1,601 crore, with gold loans accounting for ₹1,047 crore of that rise.

Much of this pressure originated from short-tenor gold loans, which require frequent visits to branches for roll-overs or bullet repayments. To curb accidental delinquencies and credit strain, Bajaj Finance discontinued its short-tenure product in August, shifting focus toward longer maturities with structured cash flows.

Key Headwinds Identified by Analysts and Lenders:

• Borrower Over-Leverage: Collections personnel across retail finance may be encouraging stressed borrowers to pledge jewellery to clear other delinquent facilities.
• Tenure Mismatches: Three-month bullet loan structures trigger technical defaults when borrowers face temporary liquidity constraints.
• Collateral Liquidation Reluctance: Large lenders are actively attempting to manage credit risk proactively rather than resorting to public auctions, which carry operational and reputational costs.
• Macro Headwinds: Retracing domestic gold prices and stubborn retail inflation threaten borrower repayment buffers.

A report by brokerage Macquarie highlighted that gold loans accounted for nearly a third of incremental retail lending in the first quarter of FY27, becoming the second-largest retail asset class behind mortgages at 28% of non-housing retail loans. Analysts cautioned that rapid unhedged expansion into gold-backed credit without stringent underwriting of the borrower's independent cash-generating capability could expose lenders to heightened credit friction.

Tags: Bajaj Finance Piramal Finance RBI NBFCs Gold Loans Indian Banking Sector