Gold Loan Rise Faces Risk? Ambareesh Baliga Flags Correction Threat For NBFCs

Gold prices have powered a sharp expansion in the gold-loan market — but what happens if the rally reverses? Market Analyst Ambareesh Baliga flags a key risk for banks and NBFCs: a deep and prolonged correction in gold prices could put pressure on loans given against pledged gold. Baliga also points to a less obvious driver of recent growth — borrowers are raising additional loans against the same gold as its value rises. Meanwhile, competition is intensifying with several new entrants in the gold-loan space. L&T Finance, which is scaling up its gold-loan business, could leverage its deep pockets, but Baliga believes its success will ultimately depend heavily on the trajectory of gold prices.