Budget 2026 Wishlist: Planning a Gold Loan? Industry Expects Major Announcements in the Union Budget

As interest in gold loans continues to rise across India, the gold loan industry is looking toward Union Budget 2026 with high expectations. Non-Banking Financial Companies (NBFCs) that specialize in gold-backed lending believe the upcoming budget could bring key reforms that may make gold loans cheaper, faster, and more accessible—especially for low-income and rural borrowers.

Finance Minister Nirmala Sitharaman is set to present the Union Budget on February 1, and gold loan companies such as Muthoot Finance and Manappuram Finance are hopeful that long-pending demands of the sector will finally be addressed.

Gold Loans Gaining Popularity Across India

Over the past few years, gold loans have emerged as one of the most preferred credit options for millions of Indians. Earlier, the gold loan market was largely dominated by NBFCs, but banks have now entered the segment aggressively, increasing competition and expanding choices for customers.

This growing competition has benefited borrowers through better service quality, improved transparency, and more flexible loan products. However, despite strong demand, NBFCs argue that regulatory disadvantages are limiting their ability to offer loans at lower interest rates.

Why Gold Loan NBFCs Want Priority Sector Lending (PSL) Status

According to gold loan providers, most gold loan borrowers belong to low-income groups, and a large portion of loans are below ₹50,000. These small-ticket loans are commonly used for critical needs such as medical expenses, education, agricultural activities, and working capital for small businesses.

Banks that provide gold loans receive the benefit of Priority Sector Lending (PSL) classification, which allows them to meet regulatory lending targets while accessing funds at lower costs. However, gold loan-focused NBFCs are currently excluded from PSL benefits, even though they cater to the same borrower segment.

Because of this exclusion, NBFCs are forced to raise funds at higher interest rates, which eventually gets passed on to customers in the form of costlier loans.

How PSL Benefits Could Lower Loan Costs for Customers

Industry experts believe that if gold loan NBFCs are granted PSL status in Budget 2026, their cost of funds would reduce significantly. This would allow them to offer gold loans at more affordable interest rates, particularly benefiting borrowers in small towns and rural areas where access to formal credit remains limited.

While urban borrowers often have multiple loan options, people in remote regions still rely heavily on gold loans for emergency funding. Lower interest rates could help reduce dependency on informal lenders who charge exorbitant rates.

UPI-Linked Gold Credit Line: A Game-Changer in the Making

Another major expectation from the upcoming budget is the introduction of a gold-backed credit line through UPI. With UPI being used by a large portion of India’s population, the gold loan industry believes integrating gold loans with digital payments could revolutionize access to credit.

Under this proposed model, customers could pledge gold jewelry digitally and access a revolving credit line via UPI apps. This would enable instant borrowing whenever needed, without lengthy paperwork or branch visits.

Such a system could help borrowers avoid high-interest emergency loans and provide quick liquidity during financial stress.

Call for Relaxation in Exposure Limit Rules

Gold loan NBFCs are also seeking relief in single counterparty exposure norms, which are currently stricter for them compared to other NBFCs. This is despite the fact that gold loans are fully secured and have shown strong repayment performance over the years.

The industry has requested that the exposure limit be increased to 20% of Tier-1 capital, in line with standard norms. This would allow well-capitalized NBFCs to utilize their funds more efficiently and support business expansion without compromising financial stability.

What This Means for Borrowers

If these demands are accepted in Budget 2026, borrowers could see:

• Lower gold loan interest rates

• Faster access to credit through digital platforms

• Better loan availability in rural and semi-urban areas

• Reduced dependence on informal moneylenders

Such reforms could strengthen financial inclusion and make gold loans a more affordable and transparent credit option for millions.

Final Outlook

The gold loan industry plays a crucial role in supporting India’s informal economy and low-income households. With rising demand and increasing digital adoption, Budget 2026 presents an opportunity for the government to unlock the sector’s full potential.

All eyes are now on the upcoming budget to see whether these expectations translate into policy action—moves that could reshape gold lending and bring meaningful relief to borrowers across the country.