Exclusive | SBI in talks to partner with fintech Rupeek for gold loans

Rupeek founder Sumit Maniyar

State Bank of India, the country’s largest lender is in talks to partner with gold loan startup Rupeek, a move which could potentially increase the fintech’s reach manifold overnight, said two people aware of the matter, requesting anonymity.

Bengaluru-based Rupeek is currently disbursing about Rs 350-375 crore in loans a month- which are lent against gold as security- compared to Rs 20 crore 18 months ago. It currently partners primarily with Karur Vysya Bank and Federal Bank, and is in talks to onboard Catholic Syrian Bank and Axis Bank, people said.

“Conversations are still going on, and specifics are yet to be agreed, but SBI’s senior management seems quite interested,” said a person aware of negotiations.

For Rupeek, founded by Sumit Maniyar in 2015 having the country’s largest lender will give it unprecedented reach. “There are talks to embed Rupeek in the SBI app, so any SBI gold loan customer now immediately has access to Rupeek,” the person said.

For SBI, bringing in a fintech lender helps organise its gold loan portfolio and service demand much better. Currently, the bank is getting a lot of demand for gold (about Rs 150 crore a day) but is not able to fulfil the demand or organise it efficiently. 

“With the kind of distribution that SBI has, they should own 30% of the gold loan market, but they account barely 15%. Rupeek can be a starting point to bridge that gap,” another person said.

SBI did not respond to a query from Moneycontrol while Rupeek declined to comment.

If the agreement does go through, Rupeek could be disbursing as much as Rs 1200 crore by March 2021, four times of its current disbursement. 

Fintech lenders have so far not become mainstream in India or achieved a huge scale for a number of reasons- from confusing regulations from the RBI and not being treated at par with banks or non-banking finance companies (NBFCs) to risky and aggressive lending practices. More recently, the COVID-19 pandemic also dealt a blow to the industry.

Gold loans, however, have the chance of being a rare breakthrough success in the space given that these loans have security, and thus defaulting risk for a lender is lower.

There are also discussions for lenders to take a small stake in Rupeek and invest via a single vehicle that represents all lenders, but these talks are at a preliminary stage, people said.

Rupeek was last valued at $300 million in February this year when it raised $60 million from Flipkart co-founder Binny Bansal, GGV Capital, Sequoia Capital and Accel Partners.

It offers gold loans at the customer’s doorstep and completes the loan underwriting-to-disbursal process within 30 minutes. By cutting down on expenses with an online-only strategy, Rupeek offers gold loans at an interest of 0.89% per month.

Indians have stocked an estimated 23,000 tonnes in gold and almost 40% of this is in South India alone, according to a 2018 KPMG India report. NBFCs, such as Muthoot and Manappuram, command 81% of the organized gold loan market, while other unorganized players, who are mostly unregulated, control 40-60% of the gold transactions in India, the KPMG report said.