MUMBAI: A surge in gold loans may partly reflect borrower stress, with lenders allowing customers already in deep delinquency to borrow against gold and repay overdue loans, Macquarie said in a report. The trend raises questions about whether gold-backed lending is driven by consumption or income-generating needs or is merely helping borrowers manage debt by shifting loans.During the company’s Q2FY27 earnings, Piramal Finance MD & CEO Jairam Sridharan said 15% to 23% of gross gold loan disbursements across the industry over the past year went to customers already more than 90 days overdue. Piramal’s policy bars lending to such borrowers.

The trend raises questions about whether gold-backed lending is driven by consumption or income-generating needs or is merely helping borrowers manage debt by shifting loans.

In its earnings call last week, Bajaj Finance said it was moving away from short-tenor gold loans, which can trigger accidental delinquencies when customers fail to repay the full principal and interest on time. The company prefers longer tenors that offer borrowers greater flexibility.“Auction is not liked by any constituent… so it’s better to manage it through risk rather than manage it through auction is how we have taken a position to be,” a company official said.According to RBI data, gold loans accounted for a third of incremental retail lending in Q1FY27. Suresh Ganapathy, an analyst at Macquarie, said gold had become the second-largest retail loan book after mortgages, accounting for 28% of non-housing retail loans.Citing Piramal’s comments on borrower stress, he said collections teams at other banks and NBFCs could be directing overdue borrowers to pledge gold and borrow from another lender to clear existing NPAs.He also cautioned that many lenders were rushing into the business without fully recognising the accompanying risks.