Gold Loan Boom Cooling? UBS Bets on Personal Loans for India’s Next Credit Wave

A UBS report finds India's unsecured credit cycle turning, with personal loans set to lead growth as gold loan momentum cools

PGurus Newsdesk

September 23, 2026

Bank personal loans just hit a 2-year growth high — here's why UBS is bullish

India is heading into a robust new phase of unsecured credit growth, with personal loans poised to lead the acceleration

The report frames the turn as the start of a new upcycle following a three-year credit cycle across microfinance, personal loans, credit cards and unsecured business loans, during which asset quality improved materially across most segments. UBS said the expected pickup rests on healthy asset quality across banks and non-banking financial companies, flat unsecured household leverage over the past three years, ample system liquidity and a more risk-on stance from lenders.

Gold loans cool as personal loans regain ground

One notable shift underpinning the outlook involves gold loans, which had increasingly substituted for personal borrowing in recent years. Unsecured household leverage in India climbed from 6% of GDP in FY19 to 10% in FY24 before stabilising, while gold loans expanded sharply from roughly 1% of GDP to about 5% by FY26. UBS expects gold-loan growth to moderate as gold prices settle, which could free up room for personal loans to accelerate.

That recovery already appears underway. Drawing on CRIF data for August 2026, UBS found personal loan growth accelerating to around 30% year-on-year for NBFCs and 9% for banks — the fastest pace for banks in two years. Within NBFCs, the rebound is being driven largely by mid- and large-ticket loans, which together make up about 75% of the overall book, with total NBFC personal loan growth climbing from 16% year-on-year in March 2025 to 30% by August 2026.

Asset quality at multi-quarter highs

Delinquency trends have also improved meaningfully. UBS noted that personal loan delinquencies in the 1-30 days past-due bucket for NBFCs fell to 1.8% in August 2026, down from 3.5% in June 2024, even as pockets of stress remain in low-ticket business loans for NBFCs. Personal loan asset quality across both banks and NBFCs, the report said, is now at its strongest level in several quarters.

UBS said the combination of improving credit quality, accelerating personal loan growth and supportive liquidity conditions could brighten the earnings outlook for select lenders as the unsecured lending cycle turns, with personal loans expected to lead the next growth phase.