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The Central Government has told in the Lok Sabha that the South Indian state is at the forefront in taking 'Gold Loan' in the country. Data from public sector banks show that as of March 31, 2026, Tamil Nadu had the highest gold loan of about Rs 4.12 lakh crore. Andhra Pradesh is at second place with Rs 2.23 lakh crore. Telangana's share was approximately Rs 92 thousand crores.

Reserve Bank of India (RBI) does not maintain state-wise data of the entire country, hence only data of public sector banks has been given. Southern states are far ahead of other states in terms of taking gold loans. More than 80 percent of the total gold comes from only 5 states of South India.

In response to the question of MP CM Ramesh, Minister of State for Finance Pankaj Choudhary said that the major part of gold loans in the country is concentrated in only five states and most of these are the states of South India.

Is this trend bad for the economy?

Gold loans have increased rapidly but the Reserve Bank has not considered it a major threat to financial stability. Loans have increased due to rising gold prices. Banks and non-banking financial companies (NBFCs) have kept the loan-to-value ratio of loans given against gold low. This has increased security.

Who is taking this loan?

Gold loans are helping villages, small businessmen and new customers connect with the formal banking system, otherwise many would have fallen prey to moneylenders. This loan is fulfilling the needs of a large section.

What kind of loans are people taking?

The Central Government has told in the Parliament that the maximum loan is taken for housing loan. Personal loan is at second place and vehicle loan is at third place. Gold loan is not in this list.

Is gold loan a loss-making deal for banks?

The risk for banks and NBFCs in gold loans is not increasing, but has become much safer and stronger than before. Non-Profiting Assets (NPA) are continuously decreasing. NPA means that loan which the bank is facing difficulty in getting back or which has gone bankrupt. There is good news for non-banking financial companies (NBFCs) also. There was a risk of sinking of about Rs 2.32 on every Rs 100 gold loan in March 2023, this amount would come down to around Rs 0.81 in March 2026. For banks, this risk was already only around 0.19 percent, which has reduced to 0.12 percent in the year 2026.

How much is the gold loan for which state?

Why do South Indian states have more gold loans?

Suraj Shukla is associated with a private financing company. He has also worked for an agency in Bengaluru. In response to this question he said, 'Gold loan is more easily available. Banks do many types of checks in case of farmer credit card or personal loan, whereas for gold loan one has to struggle with these processes less. People in South Indian states have more gold than North Indians. Traditionally, they have had a tradition of wearing gold in every religious event. People buy gold for festivals, weddings and rituals like Mundan. In such a situation, it is not surprising to have more gold loans there.

Suraj Shukla said, 'Many gold companies like Muthoot Finance, Manappuram Finance are associated with South India. There are many branches of such private financing companies here. If people are aware of their financial rights, they know that gold loan is easier to get as compared to other loans and the risk is less. People avoid going to moneylenders and fulfill their needs by pledging their gold. The bank gives loan considering the market value of gold.

On what basis do banks give gold loan?

Loans are given based on rising gold prices and falling loan-to-value (LTV) ratio. This means that how much loan is the bank giving you against the market price of the gold that you are pledging to the bank. When gold prices increase and LTV decreases, it means that lenders are now giving loans in a lower proportion to the total value of gold.

When banker Suraj Shukla was questioned in this regard, he explained, 'If you have gold worth Rs 1 lakh and the bank is giving a loan of Rs 60 thousand instead of giving a loan of Rs 75,000, then it means that the LTV of the bank has reduced. With this, even if a customer does not repay the loan, the bank can easily recover his entire money by auctioning that gold.