Mumbai, July 30 -- India's largest conglomerate-backed non-bank financiers are betting on the fast-growing gold loan market, with acquisitions emerging as the preferred route to enter the business. Within days of each other, Tata Capital and Godrej Capital, backed by eponymous groups, announced deals for established gold loan franchises, signalling a broader consolidation in secured retail lending.

On 13 July, Tata Capital entered the segment by taking a majority stake in Kerala-based Yogakshemam Loans Ltd, also known as Yogloans, while on 22 July, Godrej Capital agreed to acquire the gold loan business of Kanakadurga Finance through its subsidiary Godrej Finance, gaining an established portfolio, branch network and an operating team.

This reflects a broader realignment among diversified non-bank lenders, who are betting that gold-backed lending will become one of the country's fastest-growing secured credit segments, as soaring gold prices, changing borrower behaviour and regulatory clarity reshape the market.

According to Icra Ltd, banks have around 82% market share in gold loans, with NBFCs contributing to the rest. The share of NBFCs has shrunk from 22% in March 2021, the ratings agency said in a note on 8 October 2025. Among NBFCs, Muthoot Finance, Manappuram Finance and IIFL Finance are the top players.

On the acquisition rationale, Manish Shah, managing director and chief executive officer of Godrej Capital, told Mint: "With Kanakadurga, we saw an opportunity not only to get a headstart but also to acquire expertise. Andhra Pradesh is a high-priority market for us, not just for Godrej Capital but for the Godrej Group as well. It fit geographically, it fit as a business line, and the partnership chemistry worked."

"In gold, we will start with Andhra and then expand into Maharashtra, Gujarat, Telangana, Tamil Nadu and Karnataka," Shah said.

The gold business will be housed within Godrej Finance. The branches will remain dedicated to gold lending, but it will be an integral part of Godrej Finance. There will be no new subsidiary.

"We are currently at Rs.30,000 crore of AUM. As we grow to Rs.1 lakh crore by 2031, we expect gold loans to contribute about Rs.5,000 crore.

Asked if the non-bank lender will be cautious on consumption-generating loans, Shah said the company feels more comfortable with income-generating assets because of the visibility into how the loan will be serviced.

Tata Capital, on its part, has sought the Reserve Bank of India's nod for its acquisition even as it draws up plans for the gold business.

"We have applied to RBI and are seeking its approval for the acquisition of this entity. We expect the approvals to come towards the end of the calendar year," managing director Rajiv Sabharwal said at the company's post-earnings media call on Tuesday. "From the time we acquire, over the next two-and-a-half to three years, we expect to add close to about 500-plus branches and build a portfolio of approximately Rs.4,000-5,000 crore."

"The market is now equivalent to larger asset classes like housing or vehicle finance," said Jinay Gala, director at India Ratings and Research.

As of May end, India's bank loans against gold jewellery jumped over two-fold on year to Rs.5.14 trillion and that of NBFCs grew 70% on year to Rs.3.29 trillion, latest data from the Reserve Bank of India showed.

Both banks and NBFCs have significantly expanded their gold loan portfolios in FY26, outpacing growth in other retail loan categories, including housing. This trend has been supported by a sharp increase in gold prices, as per RBI's Financial Stability Report released last month.

To be sure, prices of 24-carat gold in India were up 45% from a year ago at Rs.1.41 lakh per 10 grams as of 28 July, as per Bloomberg data.

As the opportunity grows, the economics of entering the business are also changing. Rising compliance costs, specialized branch infrastructure and the race to build scale are making acquisitions more attractive than setting up gold loan operations from scratch.

"If you are a conglomerate, you cannot avoid this segment," Gala said. "Gold lending is highly capital-intensive. For large players, doing direct capex, rather than growing inorganically, does not make much sense because you readily get the branch network."

Experts believe such acquisitions provide a shortcut into a business where execution matters more than capital.

Tata Capital has agreed to acquire an 88.56% stake in Yogakshemam Loans for a cash consideration of about Rs.411 crore, giving it access to a gold loan franchise with assets under management of around Rs.708 crore and a network of 162 branches as of 31 March 2026. Similarly, Godrej Finance has agreed to acquire Kanakadurga Finance's gold loan business for a cash consideration of Rs.117.5 crore, with an additional Rs.17.5 crore on the fulfillment of certain conditions and adding a loan book of about Rs.280 crore as of March end.

Both Yogakshemam Loans and Kanakadurga Finance are independent, promoter-led regional non-bank financial companies (NBFCs), rather than businesses backed by private equity funds, conglomerates or large financial institutions.

As of March end, Tata Capital's assets under management (AUM), including motor finance, was at Rs.2.77 trillion. Godrej Capital's total AUM was at Rs.27,832 crore.

Unlike any other business, this segment has specific requirements on how branches should be designed and what security features they should have.

"There is significant upfront investment in branches. For a new entrant, it is better to start with an existing franchise of 100, 200 or 300 branches, and then expand into new geographies. That is why we are seeing acquisitions," said a sector expert on the condition of anonymity.

Analysts believe that the opportunity extends beyond simply adding another loan product. Siddharth Goel, director at Fitch Ratings, said the industry is undergoing a structural transformation, and that borrower behaviour has fundamentally changed.

"Earlier, households pledged gold only in times of dire need. But now borrower acceptance has increased manifold. Even for small funding requirements, they are no longer shying away from pledging gold," Goel said. "Gold lending is moving significantly from South India to North India. As that happens, the average ticket size increases, making the business more efficient and commercially viable."

The product also has inherent credit strengths. Unlike most lending products, collateral remains with the lender, who has the ability to auction it if required, making asset quality significantly more protected, analysts said.

However, experts have cautioned that the sector is not without risks, especially regulatory. "The (RBI's) regulations have introduced consumption loans and income-generating loans. Anybody who wants to bypass the loan-to-value (LTV) norms would do income-generating loans, where you can go up to 85-90% LTV," Gala said.

"A lot of NBFCs are doing that because it gives faster growth. But any volatility in gold prices would hit them hard," Gala said.

Last year, RBI had announced fresh guidelines on gold loans, which came into effect on 1 April, aiming to strengthen regulatory oversight and promote responsible lending practices in the segment.

The recent increase in gold loans is driven primarily by existing borrowers, who are using higher gold prices to secure larger loans and roll over existing debt. The rapid growth in gold loans has coincided with a moderation in the growth of outstanding personal loans for borrowers who have both personal loans and gold loans, according to RBI's FSR report.

"Overall, while asset impairment risks remain contained and LTV ratios provide a comfortable cushion, the rapid growth in lending against gold collateral amid elevated gold price volatility merits continued vigilance," the report said. "A prolonged correction in gold prices could weaken collateral protection, increase borrower stress, and result in higher delinquencies."

Despite those concerns, analysts believe that the consolidation trend has only begun and that the deal momentum will continue.

"We have also been saying there will be a high trend of acquisitions among smaller NBFCs because they cannot grow in the current environment without stronger capital and liquidity support. Larger players will also look at smaller companies to add new product lines. We have been saying this for the last three years, and now it is playing out," Gala said. Published by HT Digital Content Services with permission from MINT. For any query with respect to this article or any other content requirement, please contact Editor at [email protected]