Golden Opportunities: The Prosperous Future of Gold Loan NBFCs

The profitability of gold loan-focused NBFCs is projected to remain robust due to strong loan growth, improving operating leverage, and low credit costs. A Crisil Ratings report highlights that the attractiveness of the gold-loan business is drawing increased competition from banks, with assets under management expected to grow significantly.

Gold-loan-focused non-banking financial companies (NBFCs) are expected to see healthy profitability between 4.25% and 4.5% through FY26 and FY27, largely driven by robust loan growth, increased operating leverage, and minimal credit costs, according to a Crisil Ratings report released on Monday.

The report underscores strong demand prospects and a continued low level of credit losses, enhancing the appeal of the gold-loan sector, with banks and diversified NBFCs vying for a market share.

These companies are anticipated to experience a remarkable annualised growth rate of around 40% in assets under management (AUM). The growth is attributed to factors such as rising gold prices, shifts in credit demand towards gold loans, and regulatory developments favoring higher loan-to-value norms. Prashant Mane from Crisil emphasized that credit costs have remained below 1% for five years and are expected to stay low.

(With inputs from agencies.)