Bajaj and Piramal Finance Note Early Warning Signs in Gold Loan Sector

Leading non-bank lenders in India, Bajaj Finance and Piramal Finance, have recently highlighted initial indications of stress among borrowers who have taken loans against gold, a segment that has seen the fastest expansion in the past year. The gold loan sector has attracted considerable attention from both banks and non-bank financial companies due to the perceived security of lending against physical gold assets.

According to data from the Reserve Bank of India (RBI), loans secured by gold rose sharply in August 2026. Bank loans against gold increased by 83 percent year-on-year, reaching ₹5.6 trillion. Meanwhile, non-bank lenders saw a 69 percent rise in such loans, totaling ₹3.6 trillion as of the same month. Despite the significant growth, the overall level of defaults in this category has remained relatively low so far.

However, Bajaj Finance, which holds a substantial gold loan portfolio valued at ₹24,000 crore (approximately $2.54 billion), reported a noticeable uptick in loans overdue by more than 30 days in its quarterly results for July through September. The lender noted that its assets categorized as 'stage 2' and 'stage 3'—terms that indicate loans overdue beyond 30 days—rose by 15 basis points compared to the previous quarter.

A considerable portion of this increase was attributed to short-term gold loans, a product Bajaj Finance has since discontinued. Despite these emerging concerns, the company recorded a nearly 30 percent rise in consolidated profit after tax year-on-year as announced on Monday. Market response saw Bajaj Finance’s shares dip by 3.2 percent to ₹926.80 by midday on Tuesday, while the broader Nifty 50 index declined by 0.6 percent.

Investment analysts also pointed out additional challenges for Bajaj Finance, including the impact of rising inflation, potential restrictions from the RBI on revolving credit facilities, and new regulations from the insurance sector that could limit commission earnings.

Similarly, Piramal Finance acknowledged the rapid surge in gold loans as a budding risk factor during its recent analyst call. Jairam Sridharan, CEO of Piramal Finance, revealed that about 35 percent of their gold loan customers had outstanding gold loans from other institutions as well. During the fiscal year 2025-26, the industry witnessed around ₹4.7 trillion in gold loan disbursements to borrowers who had other loans overdue by more than 90 days.

Sridharan emphasized that while having a gold loan currently does not inherently signal increased risk within the overall portfolio, these emerging data trends warrant close monitoring going forward.

Piramal Finance posted a profit after tax of ₹545 crore for the period, marking a 66 percent increase year-on-year. Its shares were trading 3.7 percent higher at ₹2,019.50 per share following the announcement.

The growth of gold loans reflects a broader trend among Indian lenders who view borrowing against gold as a relatively secure form of credit due to the tangible collateral backing. Gold loans offer borrowers quick access to funds and are often favored for their comparatively lower interest rates and minimal credit checks, making them popular in both urban and rural areas.

However, the recent signals of rising delinquencies highlight potential vulnerabilities, especially if economic conditions tighten or inflationary pressures continue. Monitoring these early indicators will be crucial for lenders to manage risk and maintain portfolio quality in this expanding segment of consumer finance.