KOCHI: Kerala’s reliance on gold-backed loans has surged dramatically over the past year, with total outstanding gold loans rising by 44.5% to Rs 1,42,740 crore as of December 2025, from Rs 98,784 crore a year earlier, according to data with the State Level Bankers’ Committee (SLBC).
The nearly Rs 43,956 crore increase marks one of the steepest expansions in recent years, but the composition of this growth points to a structural shift in the state’s credit landscape.
The surge has been overwhelmingly driven by non-agricultural borrowing. Outstanding non-agriculture gold loans ballooned nearly sixfold, from Rs 8,350 crore in December 2024 to Rs 50,090 crore in December 2025, an increase of around 500%.
In contrast, agriculture gold loans grew marginally, from Rs 90,433 crore to Rs 92,649 crore, registering a 2.4% rise. This stark divergence suggests that while gold loans are expanding rapidly, they are increasingly being used for purposes beyond farming — ranging from consumption needs to business liquidity and possibly distress financing.
Officials point out that a key factor behind the surge is a sharp rise in price of gold, which has significantly enhanced the borrowing capacity against pledged jewellery. The price of gold jumped from Rs 76,487 per 10 grams on December 31, 2024, to Rs 1,35,927 per 10 grams on December 31, 2025 — an increase of around 77-78%. The rally appears to have encouraged borrowers to unlock higher loan amounts against the same quantity of gold, further fuelling the growth in gold-loan portfolios.
A similar trend is visible across banking segments. Public-sector banks (PSBs), which continue to dominate agricultural lending, saw their total gold loan portfolio rise by 28.3%, from Rs 58,993 crore to Rs 75,694 crore.
SLBC flags growing imbalance in agricultural credit ecosystem
Within this, agricultural loans grew by a moderate 6.2%, while non-agricultural gold loans jumped nearly sixfold to Rs 15,862 crore. Private-sector banks experienced an even sharper pivot. Their total gold loan book jumped by 82%, from Rs 24,445 crore to Rs 44,485 crore. Notably, agricultural gold loans in private banks actually declined by 17.4%, while non-farm gold loans skyrocketed by 826%, from Rs 2,169 crore to Rs 20,092 crore.
Among individual lenders, public-sector giants Canara Bank and State Bank of India continued to lead the gold-loan segment, with outstanding amounts rising to Rs 23,177 crore and Rs 22,969 crore respectively. In the private sector, Federal Bank maintained a stable gold loan portfolio of around Rs 10,946 crore, while Karur Vysya Bank recorded an extraordinary jump — from just Rs 137 crore in December 2024 to Rs 16,432 crore in December 2025 — emerging as a key driver of growth in the segment.
The SLBC has flagged this trend as a matter of concern, pointing to a growing imbalance in the state’s agricultural credit ecosystem. “The current agricultural credit landscape in our state presents a concerning paradox: while the total loan amount is rising, the actual number of Kisan Credit Cards (KCC) is steadily declining.
This trend suggests that agricultural credit is becoming increasingly concentrated in gold loans rather than diverse farming investments,” the committee noted. It also highlighted that only a limited number of banks — including Punjab National Bank, Indian Overseas Bank, Federal Bank, Canara Bank, Tamilnad Mercantile Bank, ICICI Bank, and ESAF — have managed to register growth in KCC numbers in recent quarters, indicating the narrowing reach of institutional credit.
It is also important to note that these figures pertain only to the banking sector and do not include the sizeable gold-loan portfolios of Kerala-based non-banking financial companies such as Muthoot Finance and Manappuram Finance.
The data underscores a critical shift: Kerala’s credit growth is becoming increasingly gold-dependent, but not necessarily farm-oriented.
With non-agricultural loans accounting for the bulk of the expansion and traditional farm credit instruments like KCC losing ground, the state’s banking system appears to be moving towards a model where gold collateral underpins a wide range of borrowing needs — raising important questions about sustainability, financial stress, and the future of agricultural financing, according to banking officials.