According to Umesh Mohanan, executive director and chief executive officer of Indel Money, NBFC based in Kochi, home gold collateral is expected to grow in all states with restrictions gradually eased.
He says clients do not have enough money to meet their capital flight obligations. This time, the virus turned out to be deadly due to the growing rate of infection, the number of cases and the number of deaths, forcing people to borrow more. He adds that all of this exacerbates the financial problems of ordinary people. Edited interview excerpts:
What is the forecast for a gold loan in the current fiscal year? And what will stimulate the growth of gold loans?
The outlook for gold loan demand is positive and demand will be fueled by health requirements, pandemic uncertainty, and banking sector restrictions to meet gold loan demand at an earlier pace due to lower gold prices and the end of 90% LTV. lending in March 2021, except for an increase in the credit crunch due to prevailing policies.
Our gold lending portfolio grew by about 40% in fiscal 20-21. We expect about 50% growth in FY21-22 due to our expanded geographic presence.
Did the gold lending business grow in April and May of fiscal year 22 compared to the same period last year?
Branches in locations with less travel restrictions are seeing more pent-up demand compared to last year. The industry has grown by over 25 percent. The demand for gold loans is expected to rise after the lockdown, and the post-lockdown demand growth is expected to exceed the growth recorded since the lockdown last year.
NBFC recently auctioned a record tonnage of pledged gold. Does this indicate an increase in credit risks for firms offering short-term loans?
Indeed, at this point in time when cash flow is limited for the average consumer, being able to keep their gold alive by transferring interest and continuing their initial LTV would be a better option than short-term loans. Consumers have to repay the interest along with the principal within a short period of time and, accordingly, re-pledge the collateral at a relatively lower LTV. This will result in huge cash outflows for the client compared to longer ownership schemes.
What are your plans for the company?
We plan to explore various options such as capital injections by the group’s holding company, fundraising through state-owned NIHs and private / venture capital placement for our expansion. We recently opened 25 branches in the states of Andhra Pradesh and Telangana. We also have plans to enter Maharashtra and Gujarat with our traditional regular format by the fourth quarter of fiscal year 21-22. We also plan to set up support centers in all major cities to roll out our doorstep gold loan, which operates through a network of virtual branches.
We are planning to launch prepaid cards. Our payments are fully automated, as we are connected with banks through our application. Existing clients can use our portal or mobile app to expand access to our mortgaged gold based on prevailing LTV.
We will create an automated process where customers can manage their credit line according to their preferences. We also plan to expand our online gold lending system to bring affiliates to customers, as high-end MSMEs cannot visit affiliates of gold lending companies during the gold appraisal process.