If Kerala’s non-banking financiers were a country, they would rank 16th in the world for gold reserves — right after Portugal and ahead of the United Kingdom, Spain and Austria. Together, Kerala-based non-banking financial companies (NBFCs) now hold a glittering 381 tonnes of gold, a stash that surpasses the official reserves of several European nations and testifies to the state’s enduring obsession with the yellow metal.

The combined holdings of major gold-loan giants — Muthoot Finance (208 tonnes), Manappuram Finance (56.4 tonnes), Muthoot FinCorp (43.69 tonnes), Kerala State Financial Enterprises or KSFE (67.22 tonnes), and Indel Money (around 6 tonnes) — together outweigh the gold reserves of the UK (310 tonnes) and Spain (282 tonnes).

In pure numbers, that is gold worth well over Rs 4.6 lakh crore, based on current record-high prices. Kerala’s NBFCs have quietly built up this vast reserve over decades, one household pledge at a time.

In a state where gold is a savings instrument, a symbol of status, and now a financial lifeline, the business of gold loans has become both culturally rooted and economically powerful.

“In tier-3, tier-4, and tier-5 cities, gold loans are the first preference for any immediate requirement — whether it’s putting a son through college, painting the house, or buying machinery for a workshop,” says Umesh Mohanan, executive director and CEO of Indel Money.

“The rise in gold prices has only made it more attractive. The rupee availability per gram has increased and more gold is coming into the market as people leverage their ornaments.”

At Friday’s price of Rs 12,202 per gram — or Rs 81,000 per sovereign — the value of pledged gold has hit record highs. With RBI tightening rules on unsecured lending and rolling over of loans, NBFCs find themselves in a sweet spot. The liquidity crunch has driven borrowers to seek gold-backed credit, where funds are instant, secured, and flexible.

“The gold price increase has been a boon to the Indian market, especially in the lower-income segment. With restrictions on unsecured loans, there’s a credit crunch — but gold loans have filled that gap,” adds Mohanan. However, this boom has also spurred the unorganised sector. Mohanan points out that only 37% of India’s gold loans are with organised players, while the remaining 63% remain in the unregulated space — pawnshops, small financiers, and local moneylenders.

3K tonnes of gold locked in vaults as collateral

“Any regulatory curb on the organised 37% indirectly feeds the 63% unorganised market,” he warns, explaining how intermediaries exploit RBI restrictions by releasing and re-pledging gold for higher one-day interests.

Meanwhile, a leading player, Muthoot FinCorp, paints a picture of disciplined borrowers and stable demand.

“We aren’t seeing customers rush back to borrow more just because prices are up,” says Muthoot FinCorp CEO Shaji Varghese.

“Though the loan tenure is 12 months, most customers redeem their gold in five to six months. They are taking loans for real needs — not speculation. They close the loan when their purpose is met and move on.” Varghese notes that while the auction rate has fallen from about 2.5% to nearly 1%, the trend points to responsible borrowing. “Customers are able to raise higher loan amounts with less gold, but they aren’t over-leveraging,” he says.

Globally, India is already the world’s largest consumer of gold, and the country’s gold loan market is estimated to have 2,950 to 3,350 tonnes of gold locked in vaults as collateral. Southern India — with Kerala at the heart of it — remains the epicentre of this financial culture.

Gold’s rally to near Rs 1.19 lakh per 10 grams has turned household ornaments into a national asset class. It has also blurred the lines between domestic wealth and global reserves — with Kerala’s NBFCs now collectively holding more gold than the central banks of Brazil, Australia, or South Africa.

As the world watches geopolitical tensions push investors toward gold, Kerala’s lenders sit on a mountain of it — quite literally.

Courtesy : The New Indian Express