India’s gold loan market, a cornerstone of financial inclusion, continues to flourish, driven by rising gold prices and supportive RBI regulations. Leading non-banking financial companies (NBFCs)—Muthoot Finance, Manappuram Finance, and IIFL Finance—posted mixed yet promising results in FY25, capitalizing on the sector’s resilience and regulatory clarity. Here’s an in-depth look at their performance and the factors fueling their growth.
India’s Gold Loan Market: A Resilient Powerhouse
The gold loan sector, projected to reach ₹15 trillion by 2027, thrives on India’s cultural affinity for gold and the accessibility of secured lending. Muthoot Finance, Manappuram Finance, and IIFL Finance dominate this space, leveraging extensive branch networks and customer-centric models to serve millions underserved by traditional banks. Rising gold prices (up 19.5% YTD to ₹75,233 per gram as of December 2024) and the RBI’s revised gold loan norms (effective April 2026) have bolstered loan eligibility and transparency, setting the stage for sustained growth.
Muthoot Finance: The Gold Standard
Muthoot Finance, India’s largest gold loan NBFC, delivered stellar performance in FY25. Its gold loan AUM surged 25% YoY to ₹89,079 crore, with 98% of its portfolio tied to gold loans. The company reported a 22% YoY increase in profit after tax to ₹4,468 crore, driven by robust loan growth, stable asset quality, and a 15% growth guidance reaffirmed for FY25. Muthoot’s 115 new branches in FY24 and plans for 150-200 more in FY25 underscore its aggressive expansion strategy. Despite stricter RBI norms, analysts like Motilal Oswal view Muthoot as well-positioned due to its compliance history and operational efficiency. The stock rallied 52% in FY25, hitting a 52-week high of ₹2,334.80, reflecting strong investor confidence.
Manappuram Finance: Navigating Challenges with Strategic Support
Manappuram Finance, the second-largest gold loan NBFC, faced headwinds but showed resilience. Its gold loan AUM grew 9% YoY in FY24, with total AUM reaching ₹44,200 crore in Q3 FY25. However, non-gold segments (45% of AUM), particularly microfinance via its subsidiary Asirvad MFI, dragged performance, with gross NPAs rising to 2.5% from 2% and provisions surging 271% YoY. Rising borrowing costs (9.4% vs. 9.1% last year) further pressured net interest margins. Despite these challenges, Bain Capital’s backing and a strategic shift toward secured lending signal potential recovery. Manappuram’s stock lagged, delivering 3% returns in FY25, but RBI’s relaxed LTV norms (up to 85% for loans below ₹2.5 lakh) are expected to boost disbursements.
IIFL Finance: A Comeback Story
IIFL Finance staged a strong recovery after a turbulent start to FY25. An RBI ban on new gold loans in March 2024, lifted in September 2024, initially hampered operations. However, post-ban, gold loan AUM grew 39% sequentially to ₹15,044 crore in Q3 FY25, though it fell YoY. IIFL’s focus on MSME lending and operational stabilization, supported by capital raises via rights issues and NCDs, improved liquidity and profitability. The company aims to scale its gold loan AUM to ₹22,000-23,000 crore by March 2026, increasing its gold loan share to 33% from 21%. Motilal Oswal initiated a ‘Buy’ rating with a target price of ₹520, citing resilience and regulatory compliance. IIFL’s stock surged 14% in the past month, driven by RBI’s supportive guidelines.
RBI’s Regulatory Boost and Rising Gold Prices
The RBI’s final gold loan guidelines, announced on June 6, 2025, have been a game-changer. Key updates include:
Increased LTV ratio: Up to 85% for loans below ₹2.5 lakh and 80% for loans between ₹2.5 lakh and ₹5 lakh, easing credit access for small-ticket borrowers.
Simplified processes: No mandatory credit appraisals for small loans and limited end-use monitoring for priority sector lending.
Standardized norms: Uniform valuation, audit, and auction protocols across banks and NBFCs, reducing regulatory arbitrage.
These changes, described as “milder” than the draft norms, are expected to drive disbursements and competition while maintaining transparency. Gold price surges (21% YoY to ₹98,240 per 10 grams for 24K as of April 2025) have further enhanced loan margins and eligibility, benefiting NBFCs like Muthoot, which reported gold loan growth guidance revised to 25% from 15% for FY25. However, a gold price correction in April 2025 (down ₹3,000 on April 23) briefly dented sentiment, though the long-term outlook remains bullish.
Challenges and Opportunities
While the sector benefits from structural tailwinds, challenges persist:
Regulatory Scrutiny: Stricter LTV norms (75% cap for loans above ₹5 lakh) and compliance costs may impact near-term growth, particularly for smaller NBFCs.
Rising NPAs: Muthoot’s Stage-3 assets rose to 4.3% and Manappuram’s to 2.4% in Q2 FY25, necessitating higher auctions (Muthoot: ₹250 crore in Q2).
Competition: Banks, with 104% gold loan portfolio growth in FY25, are intensifying competition, though NBFCs benefit from faster processing and rural reach.
Despite these hurdles, analysts remain optimistic. Morgan Stanley highlights Muthoot’s superior growth potential, while Emkay Global calls the RBI’s norms a “blockbuster sequel,” predicting expanded net interest margins from Q1 FY26.
Outlook for Investors
The gold loan sector’s resilience, fueled by rising gold prices and RBI’s growth-oriented policies, positions Muthoot Finance, Manappuram Finance, and IIFL Finance for long-term success. Muthoot stands out for its scale and compliance, making it a top pick for investors seeking stability. Manappuram offers value for those betting on its strategic recalibration, while IIFL appeals to risk-tolerant investors eyeing its recovery trajectory. With the gold loan market poised for exponential growth, these NBFCs are well-placed to capitalize on India’s enduring love for gold.
Stay tuned for more updates on NBFC performance and market trends!
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