India’s Massive ₹18.6 Lakh Crore Gold Loan Craze, South India Commands 75% Market Share

Five Southern states now control nearly three-quarter of India’s massive ₹18.62 lakh crore gold loan market, official parliamentary records show, exposing a sharp regional divide in how households leverage their household wealth.

While families across Tamil Nadu, Andhra Pradesh, Karnataka, Telangana, and Kerala actively pledge family gold as liquid capital, commercial giants like Gujarat remain surprisingly distant from the trend despite hosting the nation's premier jewellery and bullion trade hubs.

The figures, presented by the Ministry of Finance in the Lok Sabha in response to queries raised by Dr C M Ramesh, provide the clearest breakdown yet of regional borrowing habits and asset security across state lines.

Southern Belt Dominates Gold-Backed Credit

According to Public Sector Bank (PSB) statistics alongside RBI data as of March 31, 2026, Southern India maintains an overwhelming lead in gold-collateralised borrowing:

• Tamil Nadu sits firmly at the top of the national table, recording a staggering ₹4,11,656 crore in PSB gold loan outstanding.

• Andhra Pradesh ranks second nationwide, registering ₹2,22,953 crore.

• Karnataka secures third position with ₹98,962 crore.

• Telangana stands fourth at ₹92,394 crore.

• Kerala completes the southern cluster, recording ₹83,657 crore.

Combined with non-banking financial companies (NBFCs), these five states account for approximately ₹13.94 lakh crore of the country's broader portfolio.

Why Is Gujarat Missing From the Top Ranks?

Despite Gujarat’s long-standing reputation as a central hub for gold refining, trading, and jewellery manufacturing, the state barely registers near the top of the retail lending table.

Gujarat's PSB Gold Loan Outstanding: ₹23,381 crore

While the state's loan volume remains stable, it represents only a fraction of Tamil Nadu's or Andhra Pradesh's totals. Market analysts point to distinct financial cultures to explain the gap.

In South India, households routinely pledge family ornaments as flexible working capital for agricultural cycles, small enterprise expansion, and short-term liquidity. Conversely, entrepreneurs and individuals in Western states like Gujarat traditionally lean towards formal commercial credit, trade lines, and equity investments rather than encumbering personal gold assets.

State-Wise PSB Gold Loan Standings

(Official bank disclosures as of March 31, 2026)

Reserve Bank Allays Systemic Risk Concerns

Addressing questions regarding financial stability amidst rapid credit growth, Minister of State for Finance Pankaj Chaudhary cited Reserve Bank of India assessments indicating that the asset class remains exceptionally safe.

• Stronger Collateral Buffers: Elevated global gold prices have naturally pushed Loan-to-Value (LTV) ratios lower across banks and NBFCs, offering lenders substantial protection against market swings.

• Sinking Defaults: Non-Performing Assets (NPAs) have fallen steadily over four consecutive years. Scheduled Commercial Banks saw Gross NPAs in gold loans drop to 0.12% in March 2026 (down from 0.19% in 2023). NBFC Gross NPAs improved significantly from 2.32% to 0.81% over the same timeframe.

• Retail Credit Hierarchy: The Ministry also clarified that gold loans are not the second-largest retail product in India. Housing Loans continue to lead retail portfolios, followed by Personal Loans and Vehicle Loans.

The sector continues to operate under comprehensive RBI directions introduced in June 2025. These guidelines mandate strict consumer safeguards, including a 90% reserve price minimum on pledged auctions, mandatory advance notice to borrowers in default, full refund of surplus auction funds, and statutory compensation for delays in returning pledged jewellery.