Glowing Trend: Rising Gold Loan Portfolio May Spell Doomsday for Odisha’s Sahukaars| Exclusive

Bhubaneswar: Portraying a strong signature of financial inclusion in Odisha, the growing stock of gold loan portfolio in the State signals a doomsday for the Sahukaars or unorganised lenders who traditionally lend money at exorbitant rates of interest.

The expanding gold loan portfolio with public sector banks (PSBs) points to a big emerging trend: more borrowers are increasingly bringing their gold into the formal credit system instead of depending solely on informal sources for urgent liquidity.

As per RBI data tabled in Parliament, Odisha had an outstanding gold loan portfolio of Rs16,846 crore with Public Sector Banks as of March 31, 2026, placing the State 9th among 37 States and Union Territories listed in the data.

While Odisha is nowhere near the enormous gold-loan markets of Tamil Nadu, with Rs4,11,656 crore, or Andhra Pradesh, with Rs2,22,953 crore, its position in the upper-middle tier is significant for a State where informal credit has traditionally played a major role.

The Glittering Trend

The Rs16,846-crore PSB gold loan portfolio accounts for 1.49% of the total gold loan outstanding of Rs11,31,911.34 crore across the listed public sector banks in the country.

The size of Odisha's formal gold-backed credit market is particularly noteworthy because gold is not merely an asset of household wealth in the State; it is also an easily monetisable form of collateral for families and small businesses requiring quick access to cash.

The broader national trend strengthens the significance of Odisha's numbers. Gold lending has expanded rapidly, with rising gold prices providing a major trigger. As the value of pledged gold rises, lenders are able to extend credit against a more valuable collateral base, while declining loan-to-value ratios have simultaneously strengthened the collateral cushion available to banks and NBFCs.

Odisha Lustres High in East

Odisha's position becomes more striking when compared with its eastern and neighbouring States. West Bengal leads the immediate regional comparison with Rs16,957 crore, only marginally ahead of Odisha's Rs16,846 crore.

But the gap widens sharply thereafter. Bihar has Rs5,717 crore, which is nearly one-third of Odisha's portfolio, while Chhattisgarh stands at Rs2,001 crore and Jharkhand at just Rs1,705 crore. In other words, Odisha's PSB gold loan portfolio is more than eight times that of Chhattisgarh and almost ten times that of Jharkhand.

This eastern comparison suggests that formal gold-backed lending has acquired considerably greater traction in Odisha than in several neighbouring States. The significance is not merely about the size of a banking product; it points towards a gradual institutionalisation of borrowing, particularly among sections that may earlier have had limited access to conventional credit.

Doomsday for Sahukaars?

The expanding formal gold loan portfolio potentially strikes at the traditional business model of the Sahukaars – the neighbourhood moneylender who has historically been the quickest source of cash for households, farmers, petty traders and small businesses, but often at significantly higher interest rates and under less transparent lending conditions.

The RBI/Ministry data explicitly link the expansion of formal gold lending with a shift away from unorganised lending, particularly by bringing rural borrowers and micro, small and medium enterprises into formal credit channels. The formal system is thus absorbing credit demand that could otherwise have moved towards unorganised channels and exposed borrowers to usurious and prejudicial loan covenants.

Yet, it would be premature to write the Sahukaar out of Odisha's credit economy. The Rs16,846-crore formal portfolio, while substantial, also suggests that the informal lender continues to have a space in the market. The document itself notes that Sahukaars continue to function as high-speed liquidity providers, particularly where borrowers value immediate cash and local flexibility – areas where formal banking infrastructure may not always match the speed of informal lending.

The emerging picture, therefore, is less about an overnight extinction of the Sahukaar and more about a gradual erosion of his traditional monopoly over emergency credit.

Why Gold Loans Are Catching Borrowers' Fancy

For the borrower, the attraction is straightforward: gold converts into cash without requiring the borrower to sell the asset. A gold loan is a collateral-backed credit facility in which the borrower pledges physical gold with a regulated bank or NBFC and receives liquidity against it.

That makes the product particularly useful for borrowers who may not have a conventional credit history or sufficient income documentation to access other forms of formal credit. The document specifically identifies underserved populations and rural MSMEs as important beneficiaries of this financial-inclusion push.

For a household facing a sudden financial requirement, the gold loan can act as a formal safety net. For a small entrepreneur, shopkeeper or MSME, the same pledged asset can unlock working capital. Importantly, the borrower retains ownership of the gold as long as the loan obligations are met. The rapid growth of the product therefore reflects not simply a rising appetite for debt, but the conversion of an idle household asset into formal liquidity.

Why Lenders Are Loving Gold Too

The gold-loan boom is not a one-sided story. Banks and NBFCs also have strong reasons to expand this portfolio.

First, the loan is collateral-backed, giving the lender a tangible security against the credit extended. Second, rising gold prices have strengthened the collateral cushion because the market value of the underlying asset has risen faster than the loan exposure in many cases. This has resulted in declining LTV (Loan-to-Value) ratios and stronger protection against a possible fall in gold prices.

The biggest comfort for lenders, however, comes from asset quality. For Scheduled Commercial Banks, the gross NPA ratio in gold loans declined from 0.19% as of March 31, 2023, to 0.12% as of March 31, 2026. Among NBFCs in the middle and upper layers, the ratio fell from 2.32% to 0.81% over the same period.

Regulation has also made the formal gold-loan ecosystem more borrower-protective. Under the RBI's June 2025 directions, lenders are required to provide adequate notice before auctioning pledged gold, maintain a reserve price of at least 90% of the current collateral value, and return any surplus realised from an auction to the borrower after adjusting the outstanding dues.

Thus, the gold-loan equation increasingly works for both sides: borrowers get relatively quick access to formal liquidity against an asset they already own, while lenders get a secured loan with a valuable and liquid collateral base.

So, What Exactly Is a Gold Loan?

A gold loan is a formal, collateral-backed retail credit product. A borrower pledges physical gold jewellery or other eligible gold articles with a regulated lender – typically a bank or NBFC – and receives a loan against the assessed value of that gold. The gold remains pledged with the lender until the borrower repays the loan and applicable interest and charges.

For Odisha, therefore, the Rs16,846-crore PSB portfolio represents more than a banking statistic. It is a marker of a changing credit culture. Every additional rupee borrowed against gold through a regulated lender potentially represents a rupee of credit demand that does not have to knock on the door of the traditional Sahukaar.

The Sahukaar may still have the advantage of speed and proximity. But as formal gold lending deepens across Odisha, his once-unquestioned grip over the State's informal credit market could increasingly come under pressure.

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