Gold-Loan NBFC Profitability to Stay Robust at 4.25-4.5% in FY27: Crisil

Profitability of gold loan-focused non-banking financial companies (NBFCs) is set to remain healthy at 4.25-4.5 per cent in FY26 and FY27, aided by strong loan growth, improving operating leverage and low credit costs, according to a Crisil Ratings report.

The ratings agency on Monday said strong demand prospects and continued low level of credit losses have enhanced the attractiveness of gold-loan business, drawing increased competition from banks and diversified NBFCs.

Assets under management (AUM) of gold-loan NBFCs are expected to grow at an annualised rate of around 40 per cent over FY26 and FY27, significantly outpacing branch additions and boosting productivity, the report said.

In the first nine months of FY26, branch productivity rose about 30 per cent for these entities. For large gold-loan NBFCs, average AUM per branch shot up to about Rs 21 crore, while for mid-sized counterparts it rose to around Rs 11.5 crore.

The report attributed a large part of this growth to the sharp increase in the gold prices over the last one year, shift in demand away from unsecured credit to gold loans, and recent regulatory developments affording higher loan-to-value norms and flexibility on branch network expansion will further support growth prospect.

Prashant Mane, associate director at Crisil Ratings, was quoted as saying in the report that credit costs have stayed below 1 per cent over the past five fiscal years 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." In the near term, the report said larger gold-loan NBFCs are better positioned to capitalise on operating leverage, aided by strong franchise strength, higher business volume per branch and continued investments in technology and centralised operations.

On the other hand, mid-sized gold-loan NBFCs, many of which have been increasing branches to capture incremental demand, may continue to have relatively elevated operating expenses.