Glitter online: Increased digitisation is remoulding India's gold loan biz

The gold financing business in India is undergoing a major transformation, whose main driver is increased use of technology for faster loan processing, accurate gold valuation, safekeeping, auctions and cost-cutting.

According to a report by the World Gold Council, several leading gold loan non-banking financial companies (NBFCs) such as Muthoot Finance, Manappuram Finance and others have witnessed a significant rise in online transactions in recent months. The report states that 19.2 per cent of Muthoot Finance’s gold transactions now takes place online.

As for Manappuram Finance, the share of its online gold scheme (OGL), which used to account for 45 per cent of its AUM (assets under management) last year, had risen to 62 per cent by the second quarter of 2020.

The WGC expects that with gold-loan NBFCs expanding their branch networks and making greater use of technology, the organised gold-loan market could reach Rs 4.62 trillion ($62.8 billion) in 2021-22, from Rs 3.45 trillion ($47 billion) in 2019-20, at an annual growth rate of 15.7 per cent.

V P Nandakumar, managing director and chief executive officer of Manappuram Finance, which had a consolidated AUM of Rs 26,903 crore as on September 30, says that technology solutions have helped extend serviceability while cutting operating expenses. Manappuram’s AUM grew 5-6 per cent even during the lockdown, due to increased digitisation. 

MaCom Technology Solutions, Manappuram’s technology arm, employs over 300 engineers. Its most significant development is the Online Gold Loan (OGL) platform and the Doorstep Gold Loan facility. It has also created virtual offices and a training module for its employees, using mobility solutions. IMPS-based instant payment ensures that the loaned amount is transferred directly into the customer’s bank account.

The OGL platform simplifies the process of disbursing loans on gold. Customers who have availed themselves of the gold deposit services automatically become eligible for the loan, up to the applicable loan to value (LTV) limits, and this can be disbursed to their bank accounts or eWallet cards online, 24/7, and  almost instantaneously. 

The OGL loan account works like an overdraft loan facility, providing liquidity without any cost. The customer pays interest only for the number of days he borrows the funds, and he can make repayments online, says Nandakumar.

Muthoot Finance, another big gold-based lender, has developed a core banking solution (CBS) which forms the backbone of the company’s transaction processing, back office and MIS operations. The cost-effective solution has been built on the Dot Net platform with Oracle database at the backend.

“The CBS is designed to work smoothly on very lean bandwidth, because of connectivity constraints in the large number of our rural branches,” explains KNC Nair, Muthoot Finance’s chief information officer. “Realising the need for consolidating and effectively using the huge data of the Group’s 20 disparate business divisions, we have implemented a customer relationship management (CRM) system. All customer on-boarding is done through the CRM system and actionable insights generated from the large amount of data gathered are used for cross-selling and up-selling the company’s various products and services.” 

Muthoot reported a four-fold jump in loan disbursals via its digital platforms (Rs 207 crore) in September 2020, as compared to February 2020. Similarly, there has been a three-fold surge in digital interest collections on the company’s app and website between February and November this year (Rs 165 crore).  

That’s not all. Thanks to the company’s digital infrastructure, there has been a doubling of monthly customer transactions (loan renewal, top-ups, interest payment), touching 7.54 lakh in November this year. Also, the number of unique customers transacting on the iMuthoot app rose by 106 per cent between February and September 2020. 

Muthoot has also launched innovations like Loan@Home and Gold UNLOCKER as part of its digital offerings.

Most of Muthoot’s software solutions are developed and maintained by its fully-owned information technology subsidiary, Muthoot Systems & Technologies Pvt Ltd (Emsyne), which has a team of over 200 software development professionals. 

Rupeektech, a fintech startup, is yet another gold-based lender that has leveraged technology to come up with a branchless model, which enables it to pass on the benefit of lower operational costs to the end-customer.

The company dispatches appraisers to the prospective borrower’s doorstep to assess and pick up jewellery. It claims that the process takes about 30 minutes, and is done entirely online. Once approved, the loan is transferred to the applicant’s bank account.

Rupeek says that since it does not have physical branches, it is able to offer loans at relatively lower interest rates than the market average. It also offers flexible repayment options.

Recently, the company introduced RupeekZ, a “zero contact” gold loan kiosk, in order to safely issue gold loans during the Covid-19 pandemic. The technology is indigenous, flexible and scalable enough to be installed across the country soon, the company says.

Gold loan NBFCs are also revolutionising the industry by introducing business models founded on Internet of Things-based eLockers that will not only make the gold deposits of customers safer and more secure, but also easy to monitor, operate, audit and manage.