Gold loan major Muthoot Finance saw its active loan base shrinking in the third quarter, while the consolidated loan assets under management increased 9% year on year to Rs 54,687 crore. Managing director George Alexander Muthoot talks to FE’s Rajesh Ravi about the gold loan business and other plans.
What is the long-term future of the gold loan industry given that technology is disrupting the lending sector?
Digitisation and innovative technologies are creating unprecedented disruption in the entire banking and finance sector, and it comes as responsibility for lenders like us to be agile to meet the rising expectations of customers. The gold financing business in India has undergone a major transformation driven by the increased use of technology for faster loan processing, accurate gold valuation, safekeeping, auctions, and cost-cutting. To offer you a sense, 24 % of Muthoot Finance’s gold transactions now take place online. Muthoot Finance has launched innovations like ‘Loan@Home’ and ‘Gold UNLOCKER’ as part of its digital offerings. We dispatch appraisers to the prospective borrower’s doorstep to assess and pick up jewellery. The process is entirely conducted online. We have also developed a core banking solution (CBS) that enables the company’s entire transaction processing, back office, and MIS operations.
Yield has come down in the gold loan segment with many players, including banks, giving stiff competition?
We are aware that many lending companies are jumping onto the gold loan bandwagon owing to the good prospects that the gold loan business offers. However, we haven’t ever looked at competition as a business dampener. More players entering this business serve as a testament to the growth prospects in this space. Over the years, we have witnessed that customers who were earlier reluctant to take a gold loan are seeking interest in this product now and consider it as an alternative borrowing avenue.
As far as the yields are concerned, we have seen a pickup in the demand for gold loans with a positive economic revival. With firm gold prices, Muthoot Finance has received great help on the collateral safety side. We have recorded good growth in Q4FY22, and based on this strong approach we believe that the upcoming quarters will turn out to be equally promising as the economic activities have started picking up.
Plans and outlook for FY23?
For FY23, we aim to emerge as India’s largest diversified financial supermarket offering varied financial services apart from gold loans, and become a customer-centric business organisation enabled by technology in the long term. We have created a one-stop-shop for consumers to avail and repay gold loans, home loans, personal loans, and vehicle loans 24*7 from the comfort of their homes. For the same, we are also coming up with tailor-made innovations that can stand out in the industry.
Outlook on digital gold?
There has been an increase in millennials investing in digital gold. With time, as technology and blockchain are gaining more significance, digital gold is likely to see more investors and not just millennials. Digital gold has an upper hand over traditional forms of gold in terms of uniformity in the pricing, purity, and also the absence of design costs. In addition to that digital gold offers much more secure storage combined with a rather flexible way of investment. However, for many people, especially older generations, this shift towards digital gold might take a longer time, rather. Gold ornaments as a commodity has a lot of sentimental value attached to them in Indian households. Given the absence of direct ownership of the gold, fluctuation in gold spot prices, and a limit to the trading hours, this shift will be gradual and will take time.
What about gold-secured cards and wallets? Does Muthoot have any plans for such products?
We expect the future to entail a great opportunity for gold secured cards and gold wallets. Banks and NBFCS like us are striving to respond to the industry demand with more readily available solutions. Gold loan players have started taking up technological integrations much more seriously now. Muthoot Finance has always aimed at becoming the digital-first NBFC in the sector. We are working towards re-launching gold-secured cards and wallets soon.