Troubled gold loans pressure Indian lenders as repayment rules tighten
Key Facts
Non-bank finance companies in India are facing growing signs of repayment stress in gold loans, after Shriram Finance disclosures showed Stage 3 gold loans rising to 3.12% of its total gold-loan portfolio in the second quarter of fiscal 2027, which ended in September 2026. The ratio was 2.57% in the first quarter of the same fiscal year and 2.28% in the second quarter of fiscal 2026, according to the company’s investor presentation. The figures come amid a change in the repayment structure of some loans, as borrowers move from paying the full amount at maturity to schedules requiring periodic payments. The quarterly and annual comparisons show mounting pressure in the company’s gold portfolio, while the Stage 3 indicator remains a measure of non-performing loans within that portfolio. This puts asset quality under scrutiny as gold-backed lending continues to grow.
Data from the Reserve Bank of India, cited by Reuters, showed that gold-backed loans at non-bank finance companies rose 69% year on year to 3.6 trillion rupees in August 2026. The expansion points to a widening credit base exposed to changing repayment terms, as signs of delinquency emerge at some lenders. Reuters reported in October that Bajaj Finance had seen an increase in loans overdue by more than 30 days, partly driven by short-term gold loans that the company stopped offering. The company’s suspension of these schemes since August applies to specific short-term products, not its entire lending business. Indicators vary across companies, so the increase in delinquencies at Bajaj is neither a uniform sector-wide figure nor evidence that all gold loans have become non-performing.
At Shriram Finance, the share of Stage 3 gold loans rose to 3.12% in the second quarter of fiscal 2027 from 2.57% in the first quarter, compared with 2.28% a year earlier. The figures show deterioration in the indicator against the two previous periods, but apply only to gold loans and do not describe the company’s entire loan book. Stage 3 measurement is also distinct from Stage 2 loans, which indicate greater exposure to credit risk without necessarily meaning that a loan has been finally classified as non-performing. The distinction matters as new repayment rules reshape the relationship between lender and borrower during a loan’s term. Tracking quarterly ratios offers a view of portfolio quality trends, while the definitions and indicators disclosed by each company differ.
The news also affected the market: Shriram Finance shares closed down 4% at 865 rupees on 23 October 2026, according to a Reuters report that linked the move to the disclosure of rising delinquencies in its gold portfolio. The decline came on a day when the company also reported earnings above expectations, the same report said, making investors’ focus on loan-portfolio quality evident in the share price. The close alone does not establish that repayment rules directly caused the share price decline, but it reflects the market’s response to the disclosure of rising delinquencies. Across the sector, the development carries added weight given that gold loans at non-bank finance companies grew 69% annually through August. Each company’s performance remains dependent on its loan mix, maturities and disclosed asset-quality indicators.
The Reserve Bank of India’s directions state that the prescribed loan-to-value ratio must be maintained continuously throughout the loan term, according to the bank’s text. The regulated entities were also required to comply with the directions as soon as possible, and no later than 1 April 2026. Loans granted before an entity adopted the directions remain subject to the previous guidelines, according to the bank. This means the implementation date does not automatically shift existing loans to the new regime, and the rules’ scope depends on when each entity adopted them. In this context, the change goes beyond assessing collateral when a loan is granted and includes maintaining the loan-to-value ratio throughout the financing period.
Against the broader economic backdrop, India’s Ministry of Statistics and Programme Implementation announced on 12 November 2026 that it had released consumer price index data for October. The ministry described the October reading as provisional, while the September reading was final. The announcement date places the inflation data in the timeline of repayment pressures at lenders, without establishing a causal link between them. The economic data provide context for monitoring developments, while companies’ disclosures on gold loans remain the direct measure of changes in their asset quality. This follows an expansion in gold-backed lending and varying signs of delinquency and non-performance at several lenders.