SBI recorded a 21% growth in personal gold loan portfolio over last year while its bad loans in this segment are one of the lowest at 0.16%. In the September quarter, the public sector bank disbursed ₹11,300 crore of Krishi agri gold loans. For its peer Bank of Baroda, gold loans grew 27.8% over last year to ₹33,502 crore.
Private sector banks are not far behind. HDFC Bank has rolled out gold loan processing through 2,960 branches. It added 900 branches in second quarter alone. The bank posted 16.3% year-on-year growth in such loans and has plans to increase gold loan servicing to 5,000 branches.
“We as a bank are going very aggressive on gold loans, we are increasing our distribution massively to about 5,000 branches,” said Vikas Pandey, business head, HDFC Bank. “It’s a secured product, it has minimal NPAs (non-performing assets). We were never so strong in this segment, but we have changed gears.”
Axis Bank posted 26% on-year growth in gold loans and IDFC FIRST Bank’s gold loan portfolio has doubled over last year. Seeing the growth registered by other banks, RBL Bank revived its gold loan product last month.
Gold loan is a high-yielding business with several banks and non-banks charging interest rates upwards of 10-15%. For banks, this is increasingly becoming a lucrative segment as cost of funds is around 7% and returns are higher.
“Banks with improved focus on lending rate advantage are gaining market share in gold share versus non-bank lenders. Gold loans have grown at more than 31% CAGR (compounded annual growth rate) over a two-year period,” said Kunal Shah, analyst with ICICI Securities.
According to Reserve Bank of India data, loans against gold jewellery disbursed by banks rose from ₹46,791 crore at the end of September 2020 to ₹72,111 crore by September 2021 and ₹80,617 crore by September 2022.
At the same time, non-bank lenders are feeling the heat from banks. Traditional gold loan NBFCs like Mannappuram Finance and Muthoot Finance have witnessed a sharp decline in their standalone yields due to introduction of teaser rate schemes, which they discontinued later. Muthoot recorded muted 3% on-year loan growth in September quarter, Mannappuram’s growth was flat.
