Muthoot Finance's standalone stage 2 gold loans jumped to Rs 23,467 crore at September-end from Rs 1,876 crore in June — a twelvefold increase in a single quarter. The surge followed the Reserve Bank of India's revised gold-lending framework, which took effect on April 1, 2026 and forced lenders away from bullet repayment structures (loans where principal and interest fall due in one lump sum at maturity).

Bajaj Finance, Manappuram Finance, Muthoot Finance and Shriram Finance have all reported a rise in overdue gold loans since the rules changed. The pattern is sector-wide, not idiosyncratic — and management explanations share a common thread.

What does the new framework actually require?

The RBI requires lenders to abandon bullet repayment products. NBFCs (non-banking financial companies) responded by launching periodic-payment and EMI-based gold loans, discontinuing or scaling back schemes that allowed borrowers to settle everything at the end of a short tenure.

The regulatory intent is straightforward: instalment structures force borrowers to service debt regularly rather than gamble on a single repayment event. The transitional cost, however, is now visible in the arrears data of every major gold-loan lender.

Where the stress is concentrated

The numbers are stark, and each lender discloses them differently:

• Bajaj Finance posted a Rs 1,047 crore rise in stage 2 gold loans in the September quarter and has stopped short-tenor schemes entirely since August.
• Manappuram Finance saw stage 2 gold loans climb to roughly 5 per cent of its portfolio at September-end, from less than 0.5 per cent a year earlier — a tenfold proportional increase.
• Muthoot Finance reported stage 2 loans of Rs 23,467 crore at September-end, up from Rs 1,876 crore in June. Its stage 3 assets (loans classified as non-performing) rose to Rs 7,268 crore from Rs 3,927 crore over the same period.

Stage 2 classification, under expected credit loss accounting, covers loans showing significant deterioration in credit quality but not yet in default. The scale of migration at Muthoot suggests reclassification, not necessarily outright loss — a distinction the lenders are keen to stress.

What do the executives say?

Bajaj Finance vice chairman and managing director Rajeev Jain told the company's earnings call the firm had stopped short-tenor schemes entirely since August. He said around Rs 550 crore of the affected portfolio had already returned to stage 1 by the time of the call — early evidence, if it holds, that the stress is transitional.

Muthoot Finance managing director Alexander George said customers used to one-year bullet arrangements found the shift to monthly payments unfamiliar, requiring greater customer education and collection efforts. Manappuram chairman and managing director V P Nandakumar said the lender would reduce short-term products and pivot toward one-year loans, retaining shorter tenures only for borrowers with clearly identifiable short-term needs.

What the executives did not say is equally notable: none quantified the ultimate loss expectation, and none committed to a timeline for stage 2 levels normalising.

What does this change for borrowers and lenders?

For borrowers, monthly servicing is now the default; those who budgeted around a single year-end payment face collection calls and potential reclassification. For lenders, the framework demands collection infrastructure that gold-loan NBFCs — built around collateral recovery rather than instalment discipline — have historically needed less of.

All four lenders insist the stress is transitional. They point to early improvement in collection trends — Manappuram noted several borrowers making full or partial payments to regularise overdue accounts — and to adequate collateral cover on the underlying portfolios.

The collateral argument deserves scrutiny. Gold loans are secured by pledged metal, so ultimate recovery risk is low while gold prices hold. But collateral cover protects balance sheets, not reported delinquency ratios — and quarterly earnings will keep showing the stress until borrowers adapt to monthly payments or the portfolios season through the transition.

Confidence, in other words, is a forecast. The December quarter will test whether the "transitional" framing survives contact with the data.