Indian household borrowing is showing a clear change in composition, with secured loans gaining ground while some of the fastest-growing retail credit categories of recent years are losing momentum. Reserve Bank of India data indicate that loans against gold jewellery have surged sharply, while credit card dues and consumer durable loans have recorded only modest growth. The shift suggests that households are increasingly leaning on collateral-backed borrowing, even as overall bank credit continues to expand at a healthy pace.
Gold Lending Surges
The standout trend in the latest data is the sharp rise in gold loans. Loans against gold jewellery jumped significantly in percentage terms, a move that appears amplified by a favourable base effect but still reflects a meaningful change in borrower behaviour. Gold-backed lending has long served as a quick-access financing option for households, particularly in rural and semi-urban India, where gold remains one of the most widely held financial assets.
The surge also underscores the appeal of secured borrowing in an environment where households may be seeking liquidity without taking on expensive unsecured debt. Compared with personal loans or revolving credit, gold loans typically offer faster disbursal, lower interest rates and a clearer repayment structure. For borrowers facing temporary cash-flow stress, they can be a practical alternative to credit cards or small-ticket consumer loans.
Unsecured Credit Cools
By contrast, credit card dues have shown minimal growth, a notable development because card spending had been one of the most visible indicators of consumer confidence and discretionary demand. Consumer durable loans, which finance purchases such as appliances and electronics, have also slowed. Together, the two categories point to a moderation in short-tenor retail borrowing tied to consumption.
This does not necessarily imply a collapse in demand. Instead, it may reflect a more selective consumer, one that is either delaying discretionary purchases or financing them through channels that carry less immediate repayment pressure. It may also indicate that lenders are becoming more cautious in extending unsecured credit after a period of rapid expansion.
The slowdown in these categories is important because they are closely watched as proxies for household sentiment. When credit card dues and consumer durable loans lose pace, it often signals that consumers are prioritising essentials, preserving liquidity or waiting for better pricing and income visibility before committing to new spending.
Personal Loans Still Expand
Even with the cooling in some retail segments, personal loans continue to grow and remain a major contributor to overall bank credit. That resilience suggests that demand for general-purpose borrowing remains firm, whether for medical expenses, education, travel, debt consolidation or other household needs. Personal loans are typically unsecured, so their continued expansion also indicates that banks and non-bank lenders are still finding appetite for higher-yield retail assets.
At the system level, bank credit has risen markedly, showing that the broader lending cycle remains intact. The composition of that growth, however, is changing. Secured lending is becoming more prominent, and within retail credit, gold loans are emerging as a particularly strong segment. This mix matters because secured loans generally carry lower credit risk for lenders, while unsecured loans tend to offer higher margins but greater vulnerability if household finances weaken.
For banks, the shift may be welcome from an asset-quality perspective, especially if it reflects a preference for collateralised lending in an uncertain macroeconomic environment. At the same time, a sustained move away from unsecured consumer borrowing could temper the pace of discretionary consumption, with implications for sectors that depend on retail demand.
The latest RBI data therefore point to a nuanced credit cycle rather than a simple slowdown. Households are still borrowing, and bank credit is still growing, but the balance is tilting toward prudence. Gold loans are rising quickly, personal loans remain a key driver, and the once-fast lanes of card-based and consumer durable borrowing are losing some of their earlier momentum. That combination suggests Indian consumers are becoming more selective about how they borrow, and lenders are adapting to a market where security matters more than speed alone.