Profitability Of Gold-Loan Nbfcs Seen Stable At 4.254.5% In FY27: Crisil Ratings

(MENAFN- KNN India) New Delhi, Mar 5 (KNN) Non-banking financial companies (NBFCs) focused on gold loans are expected to maintain strong profitability, with average return on managed assets (RoMA) projected at about 4.25–4.5 per cent through this and the next fiscal, according to Crisil Ratings.

The outlook is supported by strong demand, improving operating leverage and low credit losses, despite rising competition from banks and diversified NBFCs entering the segment.

Strong Growth and Rising Competition

Aparna Kirubakaran, Director, Crisil Ratings, said,“An expansion in the lender base and intensifying competition have moderated asset yields in recent quarters for gold-loan NBFCs, though they remain higher relative to many other secured businesses.”

“While the impact on net interest margins (NIMs) has been offset by softening of borrowing costs this fiscal, overall profitability has found support from better operating leverage on the back of a surge in demand,” he added.

Assets under management (AUM) of gold-loan NBFCs are expected to grow at an annualised rate of around 40 per cent between this fiscal and the next.

In the first nine months of the current fiscal, branch productivity rose about 30 per cent, with average AUM per branch reaching around Rs 21 crore for large NBFCs and Rs 11.5 crore for mid-sized lenders.

The growth has been partly driven by a sharp rise in gold prices over the past year, along with a shift from unsecured loans to gold loans and regulatory changes allowing higher loan-to-value ratios and easier branch expansion.

Scale Advantage and Low Credit Costs

Large gold-loan NBFCs are better placed to benefit from operating leverage due to stronger franchise networks, higher business volumes and investments in technology.

Mid-sized lenders, expanding their branch networks, may face higher operating costs in the near term but are expected to improve efficiency as scale increases, particularly in Tier-2 and Tier-3 markets.

Prashant Mane, Associate Director, Crisil Ratings, noted,“Benign credit costs are another driver of profitability for gold-loan NBFCs. Losses have been historically low because of the collateralised nature of these loans, high liquidity of the underlying precious metal and well-established auction processes.

Mane added,“Credit costs have stayed below 1 per cent over the past 5 fiscals and are expected to remain low. While elevated gold prices over the past year have further strengthened collateral buffers, structural safeguards such as prudent loan-to-value norms and timely auctions should support recoveries in case of correction in gold prices.”

Overall, profitability in the gold-loan NBFC segment is expected to remain healthy, though rising competition, gold price volatility and prudent risk management will remain key factors to watch, Crisil Ratings said.

(KNN Bureau)

MENAFN05032026000155011030ID1110821150