Archive · 2 Sep 2026
India’s Gold Loans Could Drive Consumption Despite Import Risks
Many Indian families own gold but do not use it to borrow money.
Gold loans let people pledge their gold and receive cash.
Jefferies says only about 15% of household gold is currently being used this way.
It believes more gold loans could help families spend more, especially in rural and lower-income communities.
This could support the economy when monsoons are weak.
If gold prices rise by 10%, households could gain about US$400 billion in wealth.
They could also take an additional US$20–25 billion in gold loans.
However, expensive gold can also increase India’s import bill and put pressure on the country’s finances.
Gold loans account for about 7% of total bank and NBFC credit.
Jefferies estimates only around 15% of household gold holdings are currently monetised.
A return to earlier lending levels could increase gold loans by roughly US$15–20 billion annually over two years.
Higher gold prices and gold-backed borrowing could support rural and lower-income household consumption.
Gold imports rose from US$36 billion in FY23 to US$79 billion in FY26, increasing current-account pressure.
- Who
- Indian households, banks, NBFCs, and gold-loan providers; Jefferies provided the estimates.
- What
- Gold-backed lending could expand significantly and become a source of additional household consumption.
- When
- The figures cover March 2026, FY26, and projections over the next two years.
- Where
- India.
- Why
- Gold prices have risen rapidly, while lending against household gold has not kept pace; further borrowing could support spending but also raise gold-import costs.
Potential Consumption Benefits
Import and Financial Risks
Household spending
Potential Consumption Benefits
More gold-backed borrowing could support consumption, particularly among rural and lower-income households and during deficient monsoons.
Import and Financial Risks
The projected consumption boost depends on households taking on additional debt against their gold holdings.
Higher gold prices
Potential Consumption Benefits
A 10% rise in gold prices could create about US$400 billion in household wealth and generate US$20–25 billion in additional gold loans.
Import and Financial Risks
Higher gold prices can also increase India’s gold-import bill and put pressure on the current account.
Economic impact
Potential Consumption Benefits
Jefferies estimates that expanded gold lending could provide an additional 80–100 basis points of GDP or spending support.
Import and Financial Risks
Gold imports already rose to US$79 billion in FY26, equivalent to around 2% of GDP.
- Current gold-loan share
- About 7% of total bank and NBFC credit.
- Estimated gold monetisation
- Around 15% of household gold holdings, including lending through unorganised channels.
- Potential annual lending increase
- Approximately US$15–20 billion over the next two years if lending ratios revert.
- FY26 consumption impact
- The increase in gold-loan assets during FY26 corresponded to about 130 basis points of GDP, according to Jefferies.
- Effect of a 10% gold-price rise
- About US$400 billion in additional household wealth and US$20–25 billion in potential gold loans.
- Gold imports
- Imports including jewellery increased from US$36 billion in FY23 to US$79 billion in FY26.
- Import burden
- FY26 gold imports were equivalent to around 2% of GDP.