History of Gold Loans
Gold loans are as old as civilization itself, rooted in the timeless value of gold. In India, where gold is both wealth and tradition, this financial tool has evolved over centuries, shaping how millions borrow today in 2025. Let’s trace its journey from ancient pawnshops to modern NBFCs.
Ancient Beginnings
Gold lending dates back to 3000 BCE in Mesopotamia, where temples doubled as banks, lending against gold. In India, texts like the Manusmriti (200 BCE) mention pawnbroking—people pledged gold for loans at high interest, often 15-20% annually. By the Gupta Empire (4th-6th century CE), goldsmiths and merchants formalized this, offering cash against jewelry to traders and farmers. It was simple: gold’s universal value made it a safe bet for lenders.
Colonial Pawnshops
Fast forward to British India. The 18th and 19th centuries saw pawnshops thrive, especially in rural areas. Local moneylenders—sahukars—lent against gold at exorbitant rates (20-50% yearly), exploiting borrowers. The British introduced regulated pawnbroking in the 1800s, but it remained informal. By 1900, gold loans were a lifeline for farmers facing famines, though often at the cost of losing heirlooms.
Post-Independence Shift
After 1947, India’s banking system grew, but gold loans stayed niche. The 1960s saw nationalized banks like SBI dip into gold lending, offering rates around 10-12%. Yet, rural reliance on moneylenders persisted. The real shift came in the 1990s with Non-Banking Financial Companies (NBFCs) like Muthoot Finance and Manappuram. They streamlined gold loans—quick approvals, 70-80% LTV—making them mainstream. By 2000, NBFCs held over 60% of the market, charging 12-18%.
Modern Era: 2025
Today, gold loans are a ₹5 lakh crore industry in India. The RBI capped LTV at 75% in 2020, balancing risk as gold hit ₹85,000/10g in 2025. Banks offer 9-11%, NBFCs 12-16%, and digital platforms push transparency. From ancient barter to instant apps, gold loans remain India’s financial backbone—evolving, yet timeless.