NBFC Gold Loan Stress Flags Emerge in Q2 Earnings

India's gold loan boom is showing early signs of strain. After two years of rapid growth, some of the country's largest non-bank lenders have flagged repayment trouble in loans backed by gold, raising concerns about NBFC gold loan stress in one of the fastest-growing corners of Indian NBFC lending. Bajaj Finance and Piramal Finance both raised the issue in their second-quarter results.

The first detailed picture of NBFC gold loan stress came from Bajaj Finance gold loans, where the lender reported a rise in the share of loans overdue by more than 30 days. The problem was concentrated in short-tenure gold loans that asked borrowers to visit branches every three months for repayment or rollover. The lender's gold loan book stands at 24,000 crore rupees. Overall loans overdue by more than 30 days, classed as stage-two and stage-three assets, rose 15 basis points from the previous quarter.

NBFC gold loan stress surfaces at Bajaj Finance

The figures behind the NBFC gold loan stress are clearest at Bajaj Finance. Stage-two and stage-three assets rose by 1,601 crore rupees in the September quarter, of which 1,047 crore rupees came from gold loans. Stage-two loans are those where credit risk has risen but which have not yet turned non-performing, while stage-three loans have serious repayment problems. The company discontinued the short-term gold loans in August and is shifting to longer-tenure products. "A short-term loan doesn't work for the customer, doesn't work for the company, and is not sustainable," managing director Rajeev Jain said on the earnings call. The company does not expect the transitional increase to affect credit costs, and adjusting for the gold loan movement, stage-two and stage-three assets improved to 1.88% of the total from 1.90%.

Piramal flags NBFC gold loan stress among borrowers

The Piramal Finance Q2 commentary took a broader view of the problem. Chief executive Jairam Sridharan told analysts that nearly 35% of the lender's customers held a gold loan from another institution. Across the industry, about 4.7 trillion rupees of gold loan disbursements in 2025-26 went to customers with other loans that were more than 90 days overdue. "Today, presence of a gold loan on file is not an indicator of higher risk on the portfolio, but these data points are worth noting and tracking," Sridharan said. Piramal reported a profit after tax of 545 crore rupees, up 66% on year, and its shares rose 3.7% to 2,019.50 rupees.

Macquarie sharpened the warning about NBFC gold loan stress. Analyst Suresh Ganapathy said 15% to 23% of gross gold loan disbursements across the industry over the past year went to customers already more than 90 days overdue, a practice Piramal's own policy bars. The figures were first aired on the Piramal Finance Q2 call. Ganapathy suggested collection teams at some banks and NBFCs could be directing overdue borrowers to pledge gold and borrow from another lender to clear existing bad loans. He cautioned that many lenders were rushing into the business without fully recognising the accompanying risks.

The data behind the NBFC gold loan stress warning

RBI gold loan data shows gold loans accounted for a third of incremental retail lending in the June quarter. Ganapathy said gold had become the second-largest retail loan book after mortgages, accounting for 28% of non-housing retail loans. The trend raises questions about whether gold-backed lending is driven by consumption and income needs or is simply helping borrowers shift debt between lenders. It is the latest sign of NBFC gold loan stress in the official numbers.

For now, lenders say their appetite to grow gold loan books remains strong, and the RBI gold loan data will get its next test when the traditional financiers report. Investors will watch whether Bajaj Finance gold loans stabilise in the December quarter. Muthoot Finance and Manappuram Finance have not yet declared their quarterly results, so the next set of numbers will show how far the NBFC gold loan stress extends. A rush into gold lending across Indian NBFC lending books makes that test matter.