Gold prices just right for loan business, says Muthoot Finance Chairman

Has the gold loan business reached a point of saturation?

Definitely not. Indian households sit on one of the world’s biggest private stocks of gold at 25,000 tonnes. Only 10 per cent of this gold is out playing in the organised market involving all operating gold loan companies. With 90 per cent left to be tapped, we believe the saturation point is miles away.

Are start-ups and self-employed ventures now accessing gold loans more?

Our portfolio also includes corporate lending for start-ups and other companies. Most consider gold loans as bridge loans to meet timely fundraisers in case of delay in receiving capital through other means.

Gold loan as a means of lending is hassle -free and does not require any credit check; probably, this factor could have urged these ventures to prefer gold loan instead of other categories. As far as our portfolio is concerned, I don’t know whether we can denote them as an emerging new class of borrowers yet, but yes, they hold a slice of our portfolio.

Two-thirds of the loan business is done in the unorganised sector and most gold is held in the rural sector. Do you need to reach out to rural India even more aggressively?

We have over 5,000-plus branches across the nooks and corners of India. Around 65-75 per cent of them are located in Tier-2 and -3 cities, which means we are mainly serving customers from rural areas.

Our present operations show that we are reaching out to rural India already. A lot of rural households rely on micro-finance for meeting their needs. It gives more purchasing power to the lower-mid and mid segments of society and kickstarts the revival of the economy. We will continue to serve rural areas in future as well.

Does competition from new-age fintech gold loan providers worry you?

Our business objective is to serve customers well. We will continue to do so as long as we are in this business. It is a fact that new-age players are foraying into the sector and a lot of competition is out there. But it only goes to show that the gold loan sector has great growth prospects. While there is a lot of competition, we also need to understand the market is expanding and new customers are entering the market.

We have leveraged technology to bring more convenience to customers, especially new-gen and millennial customer acquisition and retention. This includes AI-based chatbots, integrated WhatsApp banking facility, video/digital KYC for customer onboarding, BBPS-enabled payment process and collaborations with platforms like Paytm, PhonePe, and GooglePay.

We have also launched ‘Loan at Home’ facility wherein the customer can take gold loans in the comfort of their homes. We have a dedicated team at Emsyne, our IT division, to constantly observe digital disruptions and check possibilities of adopting them wherever possible.

How do you assess raised demand for personal loans, credit card loans, and consumer durable loans vis-a-vis gold loans?

Personal loans, credit card loans, and consumer durable loans are entirely different categories. Gold loans do not involve any CIBIL score evaluations; you are simply pledging the asset in lieu of money, and it requires very little documentation. Gold loans come at much more reasonable interest rates than others. As of now, I think we are on the right track. The economy has started to pick up and we are adding new customers now.

Do industrial relations in the gold loan sector need a relook? Is employee attrition a major concern here?

Employee attrition ratio in the gold loan industry is similar to other sectors. I don’t believe there is any special concern about it, as of now. The ongoing splurge of urbanisation has resulted in more growth opportunities. Job aspirants can now choose their desired avenue to excel in their careers. As far as we are concerned, we believe the ‘freedom of choice’ is something good for people in terms of their careers.