The Reserve Bank of India (RBI) is alarmed by the rapid growth of gold loans, which surged by 26% year-on-year to ₹79,217 crore in Q1 FY25. This trend persists despite competition from banks. The RBI is concerned that this growth may lead to a buildup of bad debts and financial instability due to potential accounting issues, such as misclassification of non-performing loans and improper roll-overs. Gold loans, often used as a last resort, are growing faster than the overall non-banking finance company (NBFC) sector, which saw a 12% increase, reflecting rising consumer dependence on these loans.