Gold loans boom, first-time borrowers add push to credit growth: Report

India’s retail credit market remains structurally strong despite a post-festival cooling in short-term lending. Overall credit health was bolstered by a surge in gold loans and a steady influx of first-time borrowers, according to TransUnion Cibil’s Credit Market Indicator (CMI) report for the December 2025 quarter.

 

CMI rose to 102, up from 97 a year earlier and 100 in the previous quarter. It was the third consecutive quarterly improvement, signalling a broad-based recovery in credit demand, supply and repayment behaviour.

 

CMI’s significance

 

The CMI is a composite index tracking four pillars of the retail credit ecosystem:

 

• 
  Demand (are consumers seeking loans?)
• 
  Supply (are lenders extending credit?)
• 
  Consumer behaviour (how borrowers use credit)\
• 
  Performance (how well loans are repaid)

An increase in this index reflects improving credit conditions. The latest reading suggests that India’s lending ecosystem is not only expanding but also becoming more stable.

 
 

Gold loans take centre stage

 

A notable shift in the current cycle is the dominance of gold loans. A surge in gold prices has increased the value of collateral, allowing borrowers to access larger loan amounts without a proportional rise in borrower volumes.

 

Gold loan originations jumped sharply, with value growing over 100 per cent year-on-year

 

Average ticket sizes have risen nearly 1.8 times since March 2023, reaching around Rs 1.9 lakh

 

Gold accounts for 36 per cent of total loan volume and 39 per cent of value, making it the largest retail credit category

 

This trend highlights a key dynamic: growth is being driven not just by demand, but also by rising asset prices. As a result, future momentum in this segment could remain sensitive to gold price movements.

 

Geographically, gold loans are no longer confined to southern India. Northern and western states such as Uttar Pradesh, Madhya Pradesh, and Rajasthan are now seeing faster growth, indicating wider acceptance of gold-backed borrowing.

 

First-time borrowers reshape demand

 

Alongside gold loans, the other major driver is the rise in first-time borrowers, particularly younger consumers.

 

The first-time borrower segment grew 7 per cent year-on-year

 

Borrowers younger than 35 account for 58 per cent of this segment

 

Growth is being led by personal loans (up 20 per cent) and consumer durable loans (up 22 per cent)

 

This points to a consumption-led credit cycle, where new borrowers are entering the formal financial system through smaller-ticket, short-tenure loans.

 

At a broader level, credit demand is becoming more inclusive:

 

• 
  Semi-urban and rural borrowers now make up 54 per cent of total demand
• 
  The share of new-to-credit consumers has risen to 15 per cent

 

This indicates a structural shift — credit penetration is deepening beyond metros, supported by better access, digital distribution, and tailored loan products.

 

Supply normalises after festive boost

 

While demand remains strong, credit supply has moderated after the festival season — a pattern seen in previous years as well.

 

Lenders had ramped up disbursals during the festival period, aided in part by policy changes such as GST rationalisation. However, supply has since returned to levels seen at the end of 2024.

 

Within segments:

 

• 
  Auto loans saw a post-festive rebound, especially in the affordable Rs 5–10 lakh category
• 
  Consumer durable loans and personal loans continued to support consumption demand
• 
  Gold loans remained stable, backed by elevated prices
• 
  The moderation in supply is largely seasonal and does not signal any underlying stress.

 

Repayment behaviour improves

A key positive for the credit ecosystem is the improvement in loan performance. The performance index rose to 107, driven by a decline in delinquencies across most loan categories.

 

Defaults (90+ days past due) have fallen across major segments

 

Improvement is visible in both secured and unsecured loans

 

Only microloan-against-property segments show mild stress

 

This suggests that lenders are managing risk better, even as they expand credit access.

 

What this means for borrowers

For retail borrowers, the current trends have several implications:

 

Easier access to credit: More first-time borrowers are entering the system

 

Higher loan eligibility: Especially for gold loans due to rising collateral value

 

Better pricing for quality borrowers: Lenders are focusing on prime and above profiles

 

Wider reach: Credit availability is expanding beyond metros

 

However, the increasing reliance on asset-backed lending like gold loans also underscores the importance of price cycles. Borrowers using gold as collateral should be mindful of valuation risks if prices correct.

 

The big picture

 

The takeaway is that India’s credit market is evolving from a metro-centric, secured-lending-heavy system to a more diversified and inclusive ecosystem.

 

Growth is now being driven by:

 

Consumption-led borrowing

 

Younger and first-time entrants

 

Expansion into semi-urban and rural markets

 

At the same time, improving repayment trends indicate a maturing credit culture.

 

While short-term fluctuations, such as post-festival slowdowns, are likely to persist, the underlying trajectory points to a more resilient and broad-based credit market.

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