Daijiworld Media Network - Mumbai
Mumbai, Aug 20: Aditya Birla Capital's non-banking finance company (NBFC) business has entered the gold loan segment and plans to establish up to 1,000 dedicated branches across the country over the next three years, joining a growing list of major lenders seeking to capitalise on the rapid expansion of gold-backed credit.
The move comes shortly after Tata Capital entered the gold loan business by acquiring nearly 89 per cent stake in Kerala-based Yogakshemam Loans last month.
Several other major NBFCs, including Shriram Finance, HDB Financial Services, Bajaj Finance and Piramal Finance, are also looking to expand their presence in the gold loan segment as demand for loans against gold jewellery continues to rise sharply.
“Gold loans are witnessing strong structural growth in India, and our entry into this segment is a natural extension of our secured lending strategy,” said Rakesh Singh, executive director and CEO-NBFC of Aditya Birla Capital.
The company plans to establish between 200 and 300 dedicated gold loan branches by March 2027, focusing initially on high-potential markets. Over the next three years, it aims to expand the network to around 1,000 branches across India.
The new business will complement Aditya Birla Capital's existing retail and micro, small and medium enterprise (MSME) lending operations.
The expansion comes as the gold loan market witnesses unprecedented growth. According to Reserve Bank of India data, NBFCs' outstanding loans against gold jewellery increased 69.3 per cent year-on-year to Rs 3.41 trillion in June 2026, compared with Rs 2.02 trillion in June 2025.
The portfolio has more than doubled from Rs 1.43 trillion in June 2024 to Rs 3.41 trillion in June 2026. Gold loans recorded the fastest growth among major retail loan categories, with annual growth accelerating from 40.6 per cent in June 2025 to 69.3 per cent in June 2026.
Major NBFCs are now expected to add nearly 3,000 branches collectively in the coming years to take advantage of the rapid expansion in gold-backed lending.
The growing entry of diversified financial companies is likely to intensify competition with established players such as Muthoot Finance and Manappuram Finance, while also expanding access to formal credit backed by gold.
A financial analyst said increased competition was already resulting in moderation in yields. The analyst also warned that operating costs could rise as new entrants compete for experienced employees from established gold loan companies while expanding their branch networks.
“There will be people-related stress and operating costs will go up. If you want to retain existing people, you will have to remunerate them better than what you were giving them in the past,” the analyst said.
However, the secured nature of gold loans could help limit credit losses even as competition increases.
Saurabh Bhalerao, associate director at CareEdge, said competition could put pressure on lenders' spreads but noted that maintaining credit discipline and appropriate loan-to-value ratios could help manage risks.
“It is a secured lending product. If you take gold and lend against it while maintaining an appropriate loan-to-value ratio, the gold remains with you in the event of a default and can be sold to recover the loan,” Bhalerao said.
He added that credit discipline would remain crucial as more lenders enter the segment.
A sharp correction in gold prices remains another potential risk for lenders, while new entrants could face higher costs as they build teams, establish branches and develop the infrastructure required to operate the business.
Aditya Birla Capital's NBFC business reported assets under management of Rs 1.67 trillion in the first quarter of FY27, an increase of 28 per cent year-on-year. Retail and SME loans accounted for around 68 per cent of its overall portfolio.
Disbursements increased 34 per cent year-on-year to Rs 21,201 crore, while profit before tax rose 32 per cent to Rs 1,222 crore.