While the gold loan market is taking off, India has seen its share of busted finance booms.
Most recently, the country's once-soaring microfinance sector was brought to its knees in late 2010 by regulatory agencies in the southern state of Andhra Pradesh, the industry hub.
Authorities were cracking down on high rates, aggressive recovery practices and overextended borrowers.
"The biggest risk to the sector is negative regulation," said Mahrukh Adajania, an analyst with Standard Chartered Bank.
"The spreads, or the margins, of gold players and of many other NBFCs (non-banking financial companies) are very high, and whenever margins in any one financial segment are very high it has caught regulatory and political attention," she said.