India’s personal loan market is showing signs of a renewed recovery and could overtake gold loans as the fastest-growing major lending segment, according to a UBS Global Research report.The shift comes after a two-year slowdown in personal lending following regulatory tightening and concerns over rising borrower leverage. At the same time, the rapid expansion of gold loans, which was supported by higher gold prices, has started to moderate.Key HighlightsPersonal loans are showing renewed growth after a two-year slowdown.UBS expects personal loans to potentially overtake gold loans as the fastest-growing segment.NBFC personal loan growth reached around 30% year-on-year through August.Bank personal loan growth stood at around 9%.Gold loan growth surged about 50% in FY26 to around ₹18.6 lakh crore.Personal loan delinquencies have improved, while gold-loan delinquencies have increased.Personal Loans Regain MomentumAccording to the UBS report, personal loans are entering what it described as the “beginning of an unsecured upcycle”.Personal loan growth among NBFCs accelerated to around 30% year-on-year through August, while banks recorded growth of around 9%. UBS said these were the fastest growth rates for both lender categories in two years.The recovery follows a period when regulators tightened rules around unsecured lending, while lenders became more cautious about borrowers with high levels of existing debt.The improvement in repayment performance is also supporting the recovery. Thirty-day personal loan delinquencies declined from 3.5% in June 2024 to 1.8% in August 2026, according to the report.Gold Loans Had Led Retail Credit GrowthGold loans have experienced exceptional growth over the past year. Gold loan outstanding increased by around 50% year-on-year in FY26 to approximately ₹18.6 lakh crore, according to the UBS report. The surge was largely supported by the sharp increase in gold prices, which raised the value of collateral available to borrowers.Earlier data from CRIF High Mark also showed gold loans growing 50.4% year-on-year to ₹18.6 lakh crore as of March 2026, while personal loan outstanding stood at ₹16.5 lakh crore, up 12.9%.The Reserve Bank of India had also identified gold loans as one of the fastest-growing retail lending segments during 2025-26, with rising gold prices playing an important role.Why Gold Loan Growth May SlowThe rapid expansion of gold loans has been closely linked to elevated gold prices. As gold prices stabilise, the report expects one of the major factors behind the recent surge in gold lending to weaken. This could allow personal loans to regain their position as a faster-growing form of credit.NBFCs have also expanded their presence in gold lending. According to UBS, NBFCs' share of the gold-loan segment increased more than six-fold since FY18, from around 3% to 20% by August. The brokerage expects the pace of further market-share gains to moderate as gold-price-driven growth loses momentum.Personal Loan Defaults Are ImprovingOne factor supporting the personal loan recovery is the improvement in short-term delinquencies. UBS data shows 30-day personal loan delinquencies falling to 1.8% in August 2026 from 3.5% in June 2024. In contrast, gold-loan delinquencies increased from 0.7% in March to 2.6% in August.The figures suggest that repayment performance in personal lending has improved even as the segment begins to grow again.However, personal loans remain unsecured credit, meaning they do not have collateral such as gold backing them. Lenders therefore continue to monitor borrower leverage and repayment behaviour closely.What Could Happen to Lending Growth?UBS expects personal lending momentum to continue despite the possibility of higher interest rates. The brokerage has forecast a relatively shallow 50-basis-point rate-hiking cycle by the end of calendar 2026, compared with the 100-basis-point increase that derivatives markets had been pricing in at the time of the report.If personal loan growth continues to accelerate while gold-loan growth moderates, unsecured personal lending could become the fastest-growing major retail credit segment.What This Means for BorrowersFor borrowers, the changing lending landscape means more credit options but also different costs and risks. Gold loans are secured against pledged gold, while personal loans generally do not require collateral. Personal loans can therefore provide faster access to funds without pledging assets, but interest rates and eligibility depend on the borrower's credit profile and lender.The latest trend also highlights how changes in asset prices can influence borrowing behaviour. The rise in gold prices helped fuel gold lending, while improving credit performance is now supporting renewed personal loan growth.The UBS report therefore points to a potential shift in India's retail credit market, with personal loans regaining momentum as gold-loan growth begins to moderate.What Happens Next?The key indicators to watch will be personal loan growth, borrower delinquencies, gold prices and lenders' risk appetite.If personal loan growth remains strong through the rest of 2026 while gold lending slows, the two segments could see their relative positions change significantly.For now, the report points to a possible transition in India's retail credit market rather than a completed shift. Gold loans continue to represent a major and rapidly growing lending segment, while personal loans are showing signs of renewed momentum.
