Kerala sees surge in gold loan takers: Why lenders and borrowers feel safe despite volatile prices

Gold prices are jumping from record to record. In 2025 alone, gold has reached new highs 48 times, rising a total of 66 per cent. Despite this continuous surge, experts warn a price correction is possible. After crossing ₹70,000, gold has not seen major dips.

In just one and a half days, the price of a sovereign fell by nearly ₹5,000, with Wednesday seeing a ₹3,440 drop—the largest single-day fall this year. Yet, gold still trades above ₹92,000.

This volatility is causing concern in the lending market. Many are taking loans against gold, expecting prices to rise further. Growth in gold-backed loans in banks and non-banking financial institutions shows this trend clearly.

Gold loans are easier to get than personal loans and are considered secure, making them popular among borrowers and banks alike. According to the Reserve Bank of India (RBI), gold loans rose by 122 per cent until June 2025.

In Kerala, most gold loans are repaid promptly, keeping defaults low. Even if gold prices fall, banks are unlikely to face heavy losses. RBI guidelines allow loans up to 75 per cent of gold’s value, and gold loans have a maximum one-year tenure.

If gold prices fall, banks can reclaim more gold. With rising gold prices and increasing gold-backed loans, the RBI has tightened regulations, which will come into full effect from 1 April 2026.