Page 47 - Banking Finance February 2026

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around 0.22% and 2.14%, respectively. The detailed trend
of gold advances and NPAs for NBFCs (middle and upper
layer) and scheduled commercial banks is shown below:

The following table shows the last 5 FYs, Gold
Advances, and NPA by upper and middle layer
NBFC as under

Date Total Advances Gross NPA
(Outstanding) NPAs Ratio (%)
31-03-2021 1,12,428 1,365 1.21
31-03-2022 1,18,971 2,749 2.31
31-03-2023 1,29,787 3,021 2.33
31-03-2024 1,54,315 3,634 2.35
dress these concerns, the recent RBI guidelines now make
31-03-2025 2,08,481 4,470 2.14 it mandatory for entities to adopt measures of enhanced
due diligence in the form of verification of gold ownership,
Note: The information given is for NBFCs in Middle and Up- restriction of fintech intermediaries from handling collat-
per Layer as on 31.12.2024 eral directly, and auctioning of gold with transparency. RBI
guidelines also include capping of gold loans to single bor-
The following table shows the last 3 FYs, Gold rower and group of borrowers to prevent concentration
Advances, and NPA by Scheduled Commercial risk.
Bank as under
To further strengthen the prevention of concentration risk,
Date Total Advances Gross NPA the weight limit for loans against gold ornaments and gold
(Outstanding) NPAs Ratio (%) coins has been set at 1 kg and 50 g, respectively. The cen-
31-03-2023 6,15,341 1,217 0.20 tral banks further expects banks and NBFCs to ensure the
31-03-2024 7,73,248 1,513 0.20 end use of funds to prevent the utilization of funds for any
unethical business practice. These steps aim to preserve the
31-03-2025 9,83,716 2,162 0.22
asset quality of the bank and would also ensure that provi-
sioning is required only in cases of genuine credit risk and
Almost all NBFCs and banks have reported their NPA levels not for operational lapses.
in single digits; however, in the last five years, the NPA lev-
els of NBFCs have almost doubled from 1.21% in March 2021
to 2.14% in March 2025. The recent price volatility has in- Financial Inclusion and Societal Impact-
troduced specific risks. As per a recent CNBC report, JP Gold loans, as a product, have been instrumental in enhanc-
Morgan Chairman and CEO warned that the gold price rally ing the consumer credit access for the unbanked popula-
could be heading into a bubble territory. Therefore the tion of the country. NBFCs have played a key role in this, as
strict LTV breach guidelines of RBI are expected to act as a they have penetrated the most rural and semi-urban areas
preventive measure for such risks, however banks and NBFCs of the population. Across globe, the Indian population holds
will also need to employ robust internal monitoring and the most gold in the form of jewelry, and millions of rural
control systems to address any sudden shock. and urban households use that family-owned gold as col-
lateral to finance their various needs. The agriculture gold
The RBI has also shown concerns over irregularities in the loan, a product for farmers, works like an additional work-
underwriting of gold loans, especially by NBFCs. Issues like ing capital line. Many small businesses and individuals opt
laxity in the valuation of gold, duplicate pledging, auctions for gold loans in emergency situations.
without proper notice to the borrowers, and LTV breaches
are some of the major concerns of the central bank. To ad- Since gold-backed credit is secured, new-to-credit custom-

BANKING FINANCE | FEBRUARY | 2026 | 41