Everyone Wants a Piece of India's Gold Loan Boom. Sammaan Capital Is Just the Latest to Join the Queue

When a housing finance company backed by Abu Dhabi's largest conglomerate announces it is entering gold loans, it says less about that company's ambitions and more about the state of the business it is entering. That is precisely what happened this week.

Sammaan Capital — formerly Indiabulls Housing Finance, now part of the IHC Group after a landmark $1 billion investment — announced its product suite will expand from 4 to over 12 products in FY27, with gold loans and personal loans among the headline additions. The company is not alone. L&T Finance entered the gold loan business through the acquisition of Paul Merchants Finance's gold loan portfolio in an all-cash deal worth ₹537 crore, gaining approximately ₹1,000 crore in AUM and over 98,000 active customers, with the acquisition accelerating its time-to-scale by an estimated 36 months. The message from new entrants is consistent: gold loans are no longer a niche business run out of South Indian towns. They are a mainstream credit product, and every serious lender now wants skin in the game.

The question worth asking is why now. The answer sits at ₹1,59,550.

Why rising gold prices change everything for this business

That is the current price per 10 grams of 24-carat gold in India — a number that would have seemed extraordinary even three years ago. From around ₹63 per 10 grams in the 1960s to prices exceeding ₹1.5 lakh per 10 grams in 2026, gold has delivered remarkable long-term appreciation, and gold prices in 2026 have shown high volatility with an overall upward trend driven by global economic factors, persistent inflation, and geopolitical tensions.

For a layman trying to understand what this has to do with gold loans, the mechanics are straightforward. A gold loan is a secured loan where you pledge your physical gold — typically jewellery — as collateral, and a bank or NBFC lends you money against its current market value. Lenders are permitted to lend up to 75% of the gold's assessed value, called the Loan-to-Value or LTV ratio. So if your 10 grams of gold is worth ₹1,59,550 today, a lender can give you approximately ₹1.2 lakh against it.

Three years ago, when the same 10 grams was worth around ₹65,000–₹70,000, the loan you could get was roughly ₹49,000–₹52,000. The gold sitting in your locker, your mother's bangles, or your wife's earrings has effectively doubled its borrowing power without you doing a single thing. This is the fundamental engine driving the gold loan boom: existing borrowers can take larger loans on the same collateral, new borrowers who previously could not access meaningful credit now qualify for significant amounts, and lenders are building bigger loan books without proportionally increasing their risk.

As global gold prices soared more than 140% to cross $5,000 per ounce since 2024, a person with a "poor" credit score who owns good quality gold can now access a loan at a significantly better rate compared to unsecured personal loans — and most NBFCs can disburse a gold loan within an hour of a customer walking into a branch. That combination of accessibility, speed, and collateral-backed safety is structurally different from any other credit product in India.

What the AUM numbers say

The growth in gold loan books over the past year has been exceptional even by the standards of India's fast-growing credit market. Muthoot Finance — India's largest gold loan NBFC — reported a consolidated gold loan AUM of ₹1,65,000 crore for FY26, representing 54% year-on-year growth, while standalone profit after tax soared 95% to ₹10,134 crore. To put that in context, Muthoot's AUM was approximately ₹1,07,000 crore in FY25. In a single year, the company added the equivalent of a mid-sized NBFC to its book.

Manappuram Finance, the sector's second-largest player, posted consolidated AUM of ₹63,798 crore in Q4 FY26, surging 48.3% year-on-year, led by 99.1% year-on-year growth in its gold loan book specifically. That near-doubling of the gold loan book in one year is not the outcome of aggressive lending — it is the mechanical outcome of higher gold prices expanding collateral values combined with genuine demand surge.

India's gold loan sector posted new loan sourcing value growth of 91% year-on-year in Q3 FY26, the fastest expansion across any retail credit segment, with active gold loan accounts now exceeding 90 million and delinquency levels remaining remarkably low.

What analysts and brokerages say

The analyst community has been broadly constructive on this sector but with important nuance. Crisil Ratings projects the AUM of gold-loan NBFCs to expand at a CAGR of approximately 40% between FY25 and FY27, with the organised gold loan market expected to cross ₹4 trillion by March 2027, fuelled by persistently high gold prices which enhance collateral values.

On individual names, Motilal Oswal has rated Muthoot Finance 'Neutral' while Nuvama maintains a 'Buy' rating, citing supportive regulatory changes and strong demand — with the overall analyst sentiment leaning positive, underpinned by the ongoing shift towards secured credit and gold's inherent appeal as collateral.

A key concern flagged in recent brokerage notes is margin compression: Muthoot Finance reported a healthy NIM of 13.38% in Q4 FY26, but management anticipates sustainable NIMs of 11–12% going forward as funding costs have risen approximately 50–60 basis points. In comparison, Manappuram Finance has seen its NIM compress significantly from 13.5% to 9.8%, a warning sign for the sector's profitability trajectory.

Nuvama's research notes have also flagged regulatory tightening as a watch item: the RBI's updated gold loan framework has tightened the LTV definition more for NBFCs than for banks, and a tiered LTV structure effective April 1, 2026 requires lenders to maintain the 75% LTV cap through the life of the loan — not just at origination — or face penalties.

What it means for new entrants

For a company like Sammaan Capital entering this space, the opportunity is genuine but the playing field is not empty. India's gold loan market is estimated at ₹6 lakh crore and growing at 20% annually, with India's 25,000-tonne household gold holding — the world's second largest — representing an enormous latent credit opportunity that remains significantly underpenetrated in formal lending channels.

The structural advantages a new entrant brings to the table are capital and distribution. Sammaan Capital, backed by IHC Group's investment of ₹8,850 crore, is targeting around 1,600 branches and approximately 20,000 employees by FY30, with a portfolio mix that targets 60% secured retail lending. Gold loans, with their short tenures of three to six months, high yields, and low NPAs, fit squarely into that secured retail strategy.

The challenge, however, is operational rather than financial. Gold loan disbursement is a branch-intensive, trust-intensive business. Muthoot has 5,600-plus branches built over decades. Manappuram has deep roots in Kerala and South India. A new entrant — whether Sammaan or L&T Finance — has to build that branch density, train staff in gold assaying, set up secure storage, and earn borrower trust from scratch. Banks, with cheaper funding costs, are also increasingly competing for market share, which could normalise gold loan yields over time even as volumes grow.

The gold loan boom is real, its data unambiguous, and the logic for new entrants sound. But in a business where speed of disbursement and proximity to the borrower are the only real competitive weapons, winning over Muthoot Finance on its home turf will require more than capital. It will require patience — and a lot of branches.

Disclaimer: The information provided in this article is intended solely for general informational purposes. It does not constitute financial, investment, legal, or tax advice, nor should it be interpreted as a recommendation or endorsement of any investment strategy or financial product. Readers are advised to consult with a licensed financial advisor or other qualified professionals before making any financial decisions.