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How NBFCs Are Going After Gold Loan Companies

The gold lending segment in India has been dominated by specialist lenders offering quick credit. Some holders in other loan segments are now opening similar stand-alone branches that only offer gold loans, instead of offering them from their existing branches. Here, waiting times are shorter and service is fast.

Capri Global, a Mumbai-based small business and mortgage financier, is the latest entrant into this market. Starting with over 100 branches in Rajasthan, Madhya Pradesh, Delhi-NCR, Haryana, Gujarat, Uttar Pradesh and Maharashtra, the lender plans to tap into the northern and western regions of country.

The southern region has already established gold lending companies and competition there is intense.

“Gold lending companies have traditionally started operations in the south and have good penetration. The northern and western regions have relatively more opportunities for gold loan products. The gap between demand and opportunity is higher in these regions than in the south,” said Rajesh Sharma, managing director of Capri Global Capital Ltd.

Sharma expects gold loan book to reach 8,000 crore over the next five years. Capri Global’s consolidated assets under management (AUM) amount to 6,977 crores as of June 30. The lender has also tweaked its strategy of opening branches to serve gold loan borrowers. Thus, the gold lending agencies are on the ground floor, instead of the second and third floor offices it currently has.

In the case of Bajaj Finance, standalone gold lending branches showed better traction than regular branches offering gold lending. At present, the non-bank financier has 650 branches from which it offers gold lending, of which 155 are stand-alone gold lending branches. The lender plans to add an additional 75 standalone branches in 2022-23.

“Gold lending is an interesting business… We started the test with stand-alone gold lending branches, like a gold lending company would. And we have seen significant results…” Rajeev Jain, managing director of Bajaj Finance, told analysts on July 27.

According to an NBFC analyst, the customer segment is quite different from other lending products offered by banks and NBFCs.

Gold loan borrowers don’t want to wait hours for loan approvals, they want fast loans against their jewelry, the analyst said on condition of anonymity.

“It’s not easy to do that in a branch that handles all kinds of loans and serves different customer segments. In fact, the processes used in gold lending companies are different from those used by traditional lenders, which leads to faster disbursement of loans,” he said.

Rupeek, a fintech that provides home-based gold lending, has found customers more comfortable with such an arrangement as it offers them the privacy of their own home while conducting gold lending transactions.

“Going forward, we see walk-in and door-to-door banking branch offerings coexist and play an important role in onboarding new customer cohorts, which will further support the broader mission of monetizing gold. said Deepak Singhal, Senior Vice President (Business), Rupeek.

The gold loan market has been experiencing intense competition since some major banks have started offering loans against the gold.

Granted, the banks have now been slow to offer gold loans, and their aggressive expansion spree has plateaued.

Bank loans against gold jewelery remained stable between June this year compared to the previous year, increasing by only 0.8% to reach 75,024 crore.

Analysts said non-banks still hold an advantageous position in this market, although the gap is narrowing.

They also believe that customers do not want to be seen pawning their gold and therefore do not want to visit a regular branch, where they would have to wait longer.

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