Proper regulatory framework needed for organised gold lending to take off: Indel Money CEO

Bengaluru: Even as the gold market booms and fintech penetration in the non-banking financial company (NBFC) sector increases, NBFCs face their fair share of challenges in terms of regulations and market turbulence. Indel Money, a primarily gold-loaning NBFC, is looking at a Rs 50 crore profit goal for the current financial year (FY) and an initial public offering (IPO) in 2028. Umesh Mohanan, Executive Director and CEO of Indel Money tells DH’s Anushree Pratap, why the unorganised sector is still thriving in this segment. Edited excerpts:

What is your outlook for India’s booming gold loan market with NBFCs at the forefront?

The next two quarters would have a very pent up demand, especially because of the credit constraint in the unsecured lending space, including the microfinance sector, which has pushed a lot of credit crunch into the market, making gold loan the only resort to many. The majority of the existing gold loan market is controlled by the unorganised players, so that space is available. More household gold is also coming into the pledge market. Further, the credit framework that we have in our country today is structured in such a manner that an individual does not have a second chance if you default on your equated monthly installment (EMI), of say, your agriculture or home loan. At that point of time, when you have an emergency credit requirement, the only resort is a gold loan.

The organised sector’s share in gold lending has grown a lot this year. What is driving this?

While the organised sector has grown, the unorganised sector has grown equally, because the organised sectors are regulated very heavily these days, while the unorganised sectors are devoid of any regulations. The recent circular by the Reserve Bank of India (RBI) would be a cash disbursement limitation, telling us to go back to Section 269SS of Income Tax Act, 1961, which says that you cannot have a cumulative relationship of more than Rs 20,000 in cash. With this, often the customer’s only option is to go back to the unorganised sector.

What is the role played by fintech in the NBFC sector?

The fintech role played in the NBFC sector is at the tier-I cities. It could not penetrate much into the tier II-IV centers. Gold loan is a very operational-intensive and unique business. You not only need to have the trust of your lender, but you need to earn the trust of your borrower also. The commonality, I found, is that you take an online gold loan, you have to remit online and then get the delivery in 24 hours. There is a lot of ambiguity in that transaction. I found three problems: financial liability, the trust factor, the flexibility factor. Instead of relying completely on the online gold loan system, we went hybrid, which is basically extension of branches with the loan onboarding software.

Do you think fintech penetration will increase in this sector?

Yes. Even though there are a lot of regulation problems there, tech would surely increase within the operating companies. I think the proper policy framework is still yet to be found out because the RBI says that you can’t do certain things, but they haven’t been specific in saying what you can do. In the market now, fintech alone is not a comfortable zone. Fintech with an NBFC license in terms of pure lender as a combination, gives the regulator also comfort.

How frequently did you raise funds in your years of operations? How do you keep your cost of funds down?

As an organisation, we do not rely on any single vertical of funding. We have different verticals, so every day is a fund-raise for us. Since we have so many verticals, when the RBI changed the pass-through certificates (PTC) policy, we were able to get all the investors attracted to the direct assignment (DA). When the budget killed the market linked debenture (MLD) structure, we were able to push all the people to the institutional non-convertible debenture (NCD) placement. Currently though, we have a problem in a bit of a balance because around Rs 450-600 crore of public sector undertakings (PSU) banks pipeline is stuck for us this year due to policy changes.

Can you tell me about your IPO plans?

We are planning our IPO for 2028. We would be crossing somewhere on Rs 5,000 crore plus in assets under management (AUM) at any year level when we go in for this listing. We need to do at least two rounds of equity funding before that to have a base discovery at least, but current markets are not favourable, so I am not pushing the pedal. Still, discussions are still on. The market is always a cycle, and I feel good times are coming up. Currently, it is unfavourable because the market is sensitive to all sorts of moves coming in, especially from regulators.

What are your profit and revenue goals for this financial year? 

In terms of return on assets (ROA), we are targeting somewhere near 3.4-3.5. Our profit goals for the FY are above Rs 50 crore.

The year before last, we grew 78 per cent in terms of AUM. There was a lot of hue and cry from the regulators that they were quite away from the large percentage of growth. Last year, we grew 38 per cent and they were not comfortable. This year, we brought it to 30 per cent. Next year also, we will do a minimum of 30 per cent. We have the capacity to grow 70 per cent plus year-on-year, but we are clipping our wings.

Which sectors are driving your outward remittances? How much does it contribute to your revenues?

Outward remittances have been driven by education, number one. Fastest growing now is the travel sector because Indians are travelling like crazy, especially the large younger population. It is just a starting business for us at less than 1 per cent of our revenue. We look forward to bringing it up to 5 per cent of our revenue by the end of FY26. We have opened an all India network and have 23 locations approved in terms of our exchange points. We’re bringing up the second set of locations to be approved by the RBI.