Gold Loan NBFCs Face Repayment Stress as RBI Norms Trigger Surge in Stage 2 Overdues

A sharp transition in repayment models following the Reserve Bank of India's (RBI) revised gold-lending framework has triggered a wave of early delinquencies across major Indian non-banking financial companies (NBFCs).

Four prominent retail lenders—Bajaj Finance, Manappuram Finance, Muthoot Finance, and Shriram Finance—have reported a noticeable increase in overdue gold-backed loans in the July–September quarter. The repayment stress emerged after lenders altered product terms in line with tighter regulatory directives that took effect on April 1, 2026, pivoting away from traditional bullet repayment schemes toward periodic interest payments and equated monthly instalments (EMIs).

Delinquencies Surge Across Key Industry Players

Under traditional bullet loan facilities, borrowers settled accumulated interest alongside principal at maturity, typically within 12 months. In contrast, new schemes introduced post-April 2026 required frequent cash outflows. Borrowers unaccustomed to regular servicing schedules faced immediate friction, resulting in a spike in Stage 2 assets—loans overdue between 31 and 90 days:

• Muthoot Finance: The gold-lending bellwether saw its standalone Stage 2 loans surge to ₹23,467 crore at the end of September, up significantly from ₹1,876 crore recorded in June.
• Bajaj Finance: The lender reported a ₹1,047 crore rise in Stage 2 gold loans during the September quarter, driven directly by short-tenor repayment schemes launched following the new RBI norms.
• Manappuram Finance: The company's Stage 2 gold loans climbed to approximately 5% of its total portfolio by the end of September, compared to less than 0.5% in the same period the previous year.

NBFCs Course-Correct on Loan Structures

Faced with customer friction, lenders have begun rolling back short-tenure structures and shifting borrowers back toward longer-tenure schedules.

Speaking at the company's earnings call, Rajeev Jain, Vice Chairman and Managing Director of Bajaj Finance, confirmed that the firm had completely discontinued its short-tenor gold loan schemes as of August. Jain noted that around ₹550 crore of the affected portfolio had already returned to Stage 1 status as collection efforts progressed. Similarly, Manappuram Finance has initiated a phased migration of customers toward one-year loan products while retaining short-tenure options for a limited, select clientele.

Collateral Buffer and Underlying Asset Health

Lenders and rating agencies emphasise that the rise in delinquent loans represents a transitional timing mismatch rather than an outright deterioration in credit loss. Because gold loans remain secured against physical jewellery, lenders maintain loan-to-value (LTV) ratios designed to shield against capital losses.

However, the rapid expansion of the sector has increased market scrutiny. According to RBI data, outstanding gold loans from commercial banks expanded 83% year-on-year to approximately ₹5.6 trillion by August 31, 2026, while NBFC gold loan portfolios grew 69% to ₹3.6 trillion.

While lenders assert that current collateral cover is adequate, analysts caution that reliance on gold auctions to resolve delinquencies could face operational and valuation headwinds if gold prices face sudden volatility while defaults rise. For now, NBFCs are focusing on customer education, phased repayment recalibration, and early resolution strategies to normalise collections.