India’s unsecured credit market is heading for a shift as personal loans regain momentum and are set to overtake gold loans as the fastest‑growing segment, a report has said.
The report from brokerage UBS Global Research called the trend “beginning of an unsecured upcycle”, after the personal loans, which suffered a two‑year slowdown after regulatory tightening and rising borrower leverage, showed renewed momentum.
Gold loans surged about 50 per cent year‑on‑year in FY26 to roughly Rs 18.6 lakh crore, pushing the segment’s share of GDP up five-fold since FY19, from 1 per cent to 5 per cent.
The rapid surge in gold loans was driven by elevated gold prices, and the resultant boom has begun to moderate as gold prices stabilise, removing a key alternative that had displaced personal lending in recent years, the brokerage noted.
Further, NBFCs have used gold lending to grab market share aggressively, rising over six-fold since FY18, from 3 per cent to 20 per cent of the segment by August. The brokerage also forecasted the pace of share gain to moderate as the underlying growth driver fades.
Personal loan growth accelerated to around 30 per cent year-on-year for NBFCs till August and 9 per cent for banks, marking the fastest pace for both categories in two years, the report noted.
Further, the 30-day personal loan delinquencies have steadily improved, dropping from 3.5 per cent in June 2024 to 1.8 per cent in August 2026. Delinquencies in gold loans, on the other hand, rose from 0.7 per cent in March to 2.6 per cent in August.
Prospects of a rate hike are unlikely to reverse the trend, the report said, forecasting a shallower 50 basis point hiking cycle by the end of CY26, against a more aggressive 100 basis point move priced in by the derivatives market.
