In what could be tagged as a maiden tie-up in the gold loan space, private sector lender IndusInd Bank has entered into a co-lending partnership with Kochi-based gold loan firm Indel Money.
This is the first-of-its-kind conventional gold loan co-lending partnership between a gold-loan focused NBFC and a commercial bank, the Kochi firm, known for long-term loans against the yellow metal, said in a statement on Wednesday.
Under the tie-up, IndusInd Bank will offer gold loans at competitive rates to its customers, which will be originated by Indel Money, Umesh Mohanan, chief executive of Indel Money, said on Wednesday.
We will originate and process gold loans based on mutually formulated credit parameters and eligibility criteria, under this co-lending partnership. We will also service the customers through the entire life-cycle of the loans, including sourcing, documentation, collection and loan servicing, said Mohanan who is also the executive director of the diversified group.
The group is engaged in the car and two-wheeler retail, media and film production and EPC contracts.
While IndusInd Bank will take into its book 80 percent of the gold loan generated by the co-lending arrangement, the remaining 20 percent will be funded by Indel Money, Mohanan told PTI without disclosing how much incremental growth he expects in the AUM under this agreement.
The co-lending partnership as a pilot has been successfully running through this month and a national launch is expected shortly, he added.
Srinivas Bonam, head of inclusive banking at IndusInd Bank, said this collaboration is in line with the bank's strategy to bring efficient and inclusive lending solutions.
Indel Money entered the gold loan market, which used to offer only up to three months tenor for a loan, offering up to two years loan. Even after many years, Indel is the only gold loan company offering two-year gold loans, even though others have also begun to offer up to one-year loans now.
Indel has a network of 191 branches spread across Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana and Puducherry, and is on course to enter Orissa, Bengal and Maharashtra this fiscal, while Gujarat and Rajasthan next financial year. On the other hand, IndusInd has over 2,000 branches across 760 locations.
Indel closed FY21 with a live gold loan AUM of Rs 580 crore, up from Rs 336 crore in FY20 and is targetting Rs 850 crore AUM in the worst-case scenario and Rs 1,000 crore in the best scenario this fiscal, Mohanan had told PTI recently.
Indel, a part of the diversified Indel Corporation with over Rs 1,000 crore revenue last year, made a foray into gold loans in 2013, offering one-year-long loans against gold pledge first and then for two years in an industry that has never looked beyond three months after which they just auction and force-exit the customer.
The impact of its long-term loan offering forced entrenched biggies like the Muthoot groups and of late Manappuram Finance to follow the firm, moving away from their standard three months tenor.