Indian households are increasingly leaning on secured borrowing, with loans against gold jewellery emerging as one of the fastest-growing retail credit categories, according to Reserve Bank of India data. The shift comes at a time when credit card dues and consumer durable loans are expanding only marginally, suggesting that borrowers are becoming more cautious and are favouring products that offer lower rates, easier approval and collateral-backed access to funds.
The latest credit trends point to a broader rebalancing in household finance. While personal loans continue to contribute materially to overall bank credit growth, the composition of retail borrowing is changing. Gold loans, in particular, have seen a pronounced jump in percentage terms, helped in part by a favourable base effect, but also reflecting stronger demand from households seeking quick liquidity without taking on unsecured debt. In a high-interest-rate environment, the appeal of pledging gold jewellery has become more visible across income groups.
Gold Loans Gain Ground
Gold-backed lending has long served as a financial backstop for Indian households, especially in periods of income stress or uneven cash flows. What is notable now is the scale of the recent acceleration. Banks and other lenders have reported a substantial rise in such loans, indicating that borrowers are increasingly using household assets to meet consumption needs, business working capital requirements or temporary liquidity gaps. The surge also underscores the resilience of gold as a financial asset in India, where jewellery often doubles as a store of value and a source of emergency credit.
The growth in gold loans is being watched closely because it signals both opportunity and caution for the banking system. On one hand, secured lending carries lower credit risk than unsecured retail products. On the other, a rapid expansion in gold-backed borrowing can be a marker of stress among households that are turning to pledged assets rather than fresh income to fund expenses. The RBI data do not by themselves establish distress, but they do show a meaningful change in borrowing behaviour.
Unsecured Credit Slows
By contrast, credit card dues have shown only limited growth, and consumer durable loans have also slowed. That pattern suggests that discretionary spending financed through revolving or short-tenor unsecured credit is losing momentum. Credit card balances typically rise when households are comfortable using revolving credit for consumption, travel or retail purchases. A softer pace in dues may indicate more disciplined repayment, slower spending, or a shift toward alternatives that do not carry the same interest burden.
Consumer durable loans, often used to finance appliances, electronics and other household purchases, are another useful gauge of retail appetite. Their muted growth points to a more measured consumer environment. Lenders have also become more selective in unsecured retail lending after a period of rapid expansion, and that tightening may be contributing to the slowdown. For banks, the moderation in these categories is relevant because unsecured retail credit generally carries higher yields but also higher delinquency risk.
Personal Loans Still Drive Growth
Despite the cooling in some segments, personal loans remain a major engine of bank credit growth. Their continued expansion has helped lift overall bank lending, which rose markedly in the latest data. This indicates that households are still borrowing, but the channel is shifting. Personal loans, unlike gold loans, are typically unsecured and can be used for a wide range of purposes, from medical expenses and education to weddings and debt consolidation.
The broader picture is one of changing borrower preferences rather than a simple slowdown in demand. Households appear to be balancing access to credit with cost and repayment considerations. Secured products are gaining favour because they often come with lower borrowing costs and easier approval, while lenders are showing greater caution in extending unsecured credit after strong growth in previous periods.
For policymakers and lenders, the trend is significant. It suggests that retail credit growth is not disappearing, but migrating toward safer structures. That may improve asset quality for banks in the near term, even as it raises questions about the underlying financial resilience of households. The RBI data offer a snapshot of that transition: a consumer sector still borrowing, but doing so with greater reliance on collateral and less enthusiasm for revolving or discretionary unsecured debt.