New capital requirements for gold-backed loans are expected to increase pressure on some finance companies, although Fitch Ratings believes the overall impact on the financial sector will remain manageable.
The changes come as regulators move to strengthen risk management practices in gold-backed lending, a segment that expanded rapidly in recent years due to strong demand and favourable capital treatment.
According to Fitch Ratings, the revised framework will improve the sector’s risk profile by requiring banks and finance companies to hold more capital against gold-backed loans.
Finance Companies Face Greater Pressure
Fitch said the impact will be more noticeable among finance companies than banks because gold loans account for a larger share of their lending portfolios.
Under the new directive, gold loans with loan-to-value (LTV) ratios below 70% will carry a 10% risk weight, compared with zero previously.
Loans within the 70% to 100% LTV range will attract a 40% risk weight for both banks and finance companies, while loans exceeding 100% LTV will continue to carry a 100% risk weight.
As a result, Fitch estimates average risk density in gold-loan portfolios will rise from around 1% to 12% for rated banks and from 5% to 26% for finance companies.
The ratings agency expects only a modest effect on bank capital ratios.
For most banks, the impact on Common Equity Tier 1 capital is estimated at between 2 basis points and 35 basis points.
Why Regulators Are Acting
Gold-backed lending expanded rapidly after vehicle import restrictions reduced lending opportunities in other sectors.
Low capital requirements made gold loans attractive for lenders seeking growth while maintaining capital efficiency.
Fitch said the new framework complements lower loan-to-value caps introduced in May 2026 and is designed to discourage overly aggressive lending practices.
Despite the tighter rules, the agency expects lenders to continue offering gold loans because they remain less capital-intensive than many other lending products.
The new capital treatment will take effect on 1 September 2026.
Fitch does not expect the directive to trigger rating changes for affected institutions, noting that most lenders either maintain adequate capital buffers or benefit from external support.
Last modified: June 15, 2026
