Organised players note they are already regulated by the Reserve Bank of India (RBI).
"In our industry we don't require any kind of force for collection...and this makes us less vulnerable to political pressure or more regulations," said Thomas George Muthoot, chairman of Muthoot Pappachan Group, which owns Muthoot Fincorp, a gold lender with more than 1,200 branches and which competes with Muthoot Finance.
The two firms are controlled by different branches of the same family in the southern state of Kerala.
Muthoot Pappachan plans to raise about Rs 8 billion in an IPO by 2013 to fund expansion as it targets loan growth of 85 percent a year.
Already, the sector has been squeezed by regulation.
In February, the RBI removed gold lending's "priority sector" status under which banks could meet regulatory requirements by buying gold loan portfolios, which provided a ready and relatively cheap source of funding for gold lenders.
Other regulatory risks include a possible cap on interest rates or rules imposed by individual states, Ambit Capital said.
"These kinds of regulatory negative surprises could happen from time to time...like what happened with the microfinance industry," said J Venkatesan, a fund manager at Sundaram Asset Management, which held Manappuram shares at the end of March.