Gold Loan Credit Risk Intensifies in Loans Exceeding Rs 2.5 Lakh Compared to Other Products: Piramal Finance Executive

Piramal Finance Crosses Rs 1 Lakh Crore AUM Milestone, Eyes Caution in Macro Environment

Piramal Finance has achieved a significant milestone by crossing the Rs 1 lakh crore Assets Under Management (AUM) mark in FY26, marking a major achievement for the company. The firm also reported tripled profits of Rs 1,500 crore and secured a credit rating upgrade from AA to AA+.

A Challenging Macro Environment Ahead

According to Jairam Sridharan, MD and CEO of Piramal Finance, the company is now focused on navigating a challenging macro environment. Crude oil prices, consumer stress, and shifting borrowing behavior are forcing lenders to reassess their strategies. The Prime Minister's recent address has acknowledged the need for behavioral change in consumers, particularly in relation to fuel consumption.

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In countries like the US, gas prices have risen sharply, leading to automatic adjustments in consumer behavior. In contrast, India has protected its consumers from the price mechanism, resulting in unchanged behavior. As a lender, this means being more cautious in bets and careful in underwriting norms.

Tightening Underwriting Norms and Reducing Exposure

Piramal Finance has identified sectors vulnerable to the current macro situation and has tightened its underwriting norms across those sectors. The company has reduced origination in impacted areas by 1.5 to 2% and stopped doing riskiest originations altogether. Sectors being closely watched include small businesses in food and beverage, transporters, courier companies, and businesses linked to tiles, ceramics, and exports to the Middle East.

FY26: A Watershed Year

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FY26 was a landmark year for Piramal Finance, with several significant milestones achieved. The company became a Rs 1 lakh crore AUM company in March, grew profits 3x to Rs 1,500 crores, and received a credit rating upgrade from AA to AA+. The NBFC market also performed better than banks, with NBFC market caps significantly outperforming bank stocks over the past year.

Shift in Customer Behavior

The biggest change in customer behavior is in deposit behavior, with customers increasingly opting for capital markets directly into equity or mutual funds. This shift is fundamentally changing the banking sector, making it harder for banks to lend. NBFCs, which are more dependent on capital markets for funding, are benefiting from this shift.

Early Signs of Stress in Retail Credit

While FY26 numbers have been benign, the macro environment is working against consumers. Crude oil prices are a single biggest variable, and if they rise above $100 a barrel, India will face serious stress. LPG consumption is down 13–14% month on month for two consecutive months, indicating stress at the consumer level.

Gold Loan Segment: A Challenging Period Ahead

The gold loan segment is likely to face challenges due to its rapid growth over the last two years. Credit risk in gold loans is higher at the larger ticket end, with loans above Rs 2.5 lakh being two to three times as risky as smaller ticket ones. This trend is a result of some larger gold loans being taken for business purposes, which is a hypothesis that Piramal Finance is exploring.