Gold loans surge 25%: why RBI says there’s no cause for alarm yet

Credit in India is expanding briskly, and Reserve Bank of India Governor Sanjay Malhotra says that is not yet a reason to worry. In an interview with Doordarshan News, Malhotra said overall credit growth is running close to 18%, with certain pockets moving even faster: MSME lending and gold loans are both growing at 24-25%.

Malhotra was careful to draw a distinction with a previous episode of rapid lending growth. Referring to the excesses seen in the microfinance sector roughly two years ago, he said, “we do not see immediate distress” in the current credit expansion, even as fast-growing segments such as gold loans and MSME credit are being watched closely for signs of future slippage.

The governor’s comments came as he addressed the twin concerns of rising prices and rapid credit growth together, suggesting RBI is inclined to look through both for now rather than tighten policy in response. He described inflation as “under control although it is currently a bit elevated,” attributing the increase primarily to supply-side factors rather than demand-driven overheating.

On the RBI’s broader mandate, Malhotra said price stability remains the primary objective and growth the secondary one, but argued the two are not in conflict. “These two objectives are not contradictory. They support each other,” he said, a framing that suggests the central bank does not see its current growth-supportive stance as being at odds with controlling inflation.

He also pointed to resilience in the broader economy, saying growth remains steady despite global turbulence, supported by domestic demand and investment activity. Consumer price inflation is projected at about 5.1% for the year, which Malhotra acknowledged is “slightly above our target,” but said the increase is concentrated in specific sectors and tied to supply shocks rather than broad-based price pressure.

The governor’s remarks indicate that the RBI’s near-term approach will focus on the composition of inflation and the specific segments driving credit growth, rather than reacting to headline numbers alone. For MSMEs and gold-loan borrowers benefiting from the current lending expansion, Malhotra’s comments signal continued access to credit for now, alongside closer central bank monitoring of these fast-growing loan categories.

Wikimedia Commons/by Nichalp