KOCHI: Kerala's leading private-sector banks are quietly rewriting their lending playbook, steadily increasing the share of gold loans in their balance sheets as the yellow metal emerges as the fastest-growing segment of their retail portfolios.
At CSB Bank, gold loans now account for a remarkable 53.6 per cent of total advances after the portfolio expanded 46.7 per cent in the past year. Federal Bank and South Indian Bank (SIB) are moving in the same direction, with gold loans accounting for 25.3 per cent and 23.9 per cent of their respective loan books, while growing 33 per cent and 43 per cent—well ahead of their overall credit growth.
For decades, Kerala's organised gold loan market was synonymous with reputed names like Muthoot Finance and Manappuram Finance, the two specialist lenders that transformed lending against household gold into one of India's most profitable retail finance businesses. Commercial banks largely remained financiers to these companies rather than competitors in the gold loan market itself.
Distinction is beginning to blur
The latest quarterly numbers suggest Kerala's leading banks are steadily increasing the weight of gold loans in their portfolios, attracted by a business that combines rapid growth with the comfort of collateral.
Gold loans are secured, carry relatively lower credit risk and can be processed quickly, making them an increasingly attractive avenue at a time when banks are consciously shifting towards secured retail lending.
The trend is most striking at CSB Bank, where gold loans have risen to Rs21,906 crore from Rs14,928 crore a year earlier, taking their share of total advances to 53.6 per cent from 45.3 per cent.
More than half the bank's lending book is now backed by pledged gold, making it India's most gold loan-oriented commercial bank.
Federal Bank, traditionally known for its diversified retail and corporate franchise, has also substantially increased its exposure. Its gold loan portfolio has expanded to Rs41,476 crore from Rs31,203 crore a year earlier, lifting gold loans to 25.3 per cent of total advances from 21 per cent.
Steady rise in gold loans share
South Indian Bank is following a similar trajectory. Gold loans climbed to Rs24,930 crore from Rs17,446 crore, increasing their share of total advances to 23.9 per cent from 19.6 per cent within a year.
The significance of these figures lies not merely in the growth of gold loans but in their increasing importance within banks' overall lending strategies. While overall advances are growing in the low- to mid-teens, gold loan portfolios are expanding at more than twice that pace, steadily occupying a larger share of bank balance sheets.
Whether this marks a permanent shift in Kerala's banking model remains to be seen. However, if the current trajectory continues, CSB Bank may well offer a glimpse into the future.
With more than half its advances already backed by gold, the rapid rise in the share of gold lending at Federal Bank and South Indian Bank raises the possibility that the business long dominated by Muthoot Finance and Manappuram Finance could increasingly become a defining feature of Kerala's commercial banks as well.
