led the country in outstanding gold loans, with borrowers across agriculture, MSMEs and other segments increasingly leveraging their gold holdings
State-owned Indian Bank ’s gold loan portfolio in TN jumped 50.3% year-on-year (YoY) to `1,06,818 crore as of March 31, 2026, from `71,079 crore a year earlier. The agriculture segment was the primary driver of gold loan demand in the state, accounting for 85% of the portfolio, followed by retail and MSMEs at 11% and 4%, respectively. In TN, MSME segment accounted for `4,396 crore, representing 4% of the total gold loan portfolio. As of June 30, 2026, Indian Bank’s gold loan portfolio in TN stood at `1,10,134 crore, against `77,212 crore in the year-ago quarter, reflecting a YoY growth of 42.6%. Another Chennai-headquartered PSB, Indian Overseas Bank (IOB), recorded 54% YoY increase in its gold loan portfolio between FY25 and FY26. Cholamandalam Investment and Finance Company (Chola), the financial services arm of the Murugappa Group, entered the gold loan segment last year and exceeded an assets under management (AUM) of `2,000 crore in the category during Q1 FY27. Gold prices rose sharply over the past year, from `8,510 per gram for 22-carat gold on April 1, 2025, to `11,460 per gram on March 31, 2026. On August 28, 2026, the price stood at `14,650 per gram.
The Union ministry of finance said loans against gold have been instrumental in promoting financial inclusion and providing access to credit, particularly to rural borrowers, micro, small and medium enterprises (MSMEs) and underserved segments of the population. These loans were primarily availed by MSME enterprises to meet working capital requirements, support business operations and finance manufacturing activities,” a senior Indian Bank official said. IOB MD and CEO Ajay Kumar Srivastava said gold loans were also availed by small businesses, traders, manufacturers and service providers to meet immediate funding requirements. “The funds availed supported the purchase of raw materials, inventory build-up, machinery repairs, expanding business activities and bridging temporary cash-flow gaps, contributing to growth,” he added. Gold should unlock a business opportunity — not finance a business weakness,” he said.
They bring new-to-bank or new-to-credit customers into formal lending channels, including banks and NBFCs, and protect borrowers who could otherwise be pushed into unorganised channels and exposed to usurious interest rates and unfavourable loan covenants. “Gold loans are actively availed for business growth by various manufacturing industries to upgrade machinery and technology, invest in new products and capacity expansion, execute bulk orders, expand businesses and establish new units. Gold loans were availed for crop cultivation, purchase of agricultural inputs, dairy and allied activities, working capital requirements, education, medical expenses and other urgent household needs. M K Anand, founder of SEE CHANGE Consulting and strategic business advisor to MSMEs, observed that gold loans have become a financial shock absorber for TN’s micro and small businesses. “The deeper story is that gold is becoming a bridge between household wealth and entrepreneurial working capital. “For an MSME: use gold loans to bridge a temporary cash-flow gap — not to finance a permanent business problem. If the business has a healthy order book, predictable receivables and a clear repayment cycle, a gold loan can be a powerful short-term working-capital tool. But if the business is structurally loss-making, using family gold to keep it alive only postpones the problem. For long-term manufacturing expansion, machinery purchases and capacity creation, MSMEs should graduate to structured term loans, working-capital limits, credit-guarantee-backed finance and institutional funding mechanisms.