Mumbai, March 2 The profitability of non-banking financial companies (NBFCs) focused on gold loans is expected to remain healthy at 4.25-4.5 per cent in FY26 and FY27, driven by strong loan growth, improved operating leverage, and low credit costs, according to a Crisil Ratings report.
The rating agency said that strong demand prospects and continued low levels of credit losses have enhanced the attractiveness of the gold loan business, attracting increased competition from banks and diversified NBFCs.
Assets under management (AUM) of gold-loan NBFCs are expected to grow at an annualized rate of around 40 per cent over FY26 and FY27, significantly outpacing branch additions and boosting productivity, the report said.
In the first nine months of FY26, branch productivity rose by about 30 per cent for these entities. For large gold-loan NBFCs, the average AUM per branch increased to about Rs 21 crore, while for mid-sized counterparts, it rose to around Rs 11.5 crore.
The report attributed a large part of this growth to the sharp increase in gold prices over the last year, the shift in demand from unsecured credit to gold loans, and recent regulatory developments affording higher loan-to-value norms and flexibility on branch network expansion, which will further support growth prospects.
Prashant Mane, Associate Director at Crisil Ratings, was quoted as saying in the report that credit costs have remained below 1 per cent over the past five fiscal years and are expected to remain low.
"While elevated gold prices over the past year have further strengthened collateral buffers, structural safeguards such as prudent loan-to-value norms and timely auctions should support recoveries in case of a correction in gold prices."
In the near term, the report said that larger gold-loan NBFCs are better positioned to capitalize on operating leverage, aided by strong franchise strength, higher business volume per branch, and continued investments in technology and centralized operations.
On the other hand, mid-sized gold-loan NBFCs, many of which have been increasing branches to capture incremental demand, may continue to have relatively higher operating expenses.