SafeGold to allow customers to lease idle gold to jewellers for yields of up to 5%

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Digital gold platform SafeGold will now allow customers to lease their idle gold to medium and small-scale jewellers in exchange for yields of 2.5-5 percent, the company said on October 13.

The World Gold Council and BEENEXT-backed platform which facilitates the purchase of digital gold on its platform as well as through partners including PhonePe, Jar, AmazonPay, Tata Neu, Flipkart, and Tanishq, is looking to tap the potential of idle gold in Indian households through the move.

In a conversation with Moneycontrol, SafeGold founder and MD Gaurav Mathur said that the company plans to lease one ton of gold in the first year to 400-500 jewellers.

“Two hundred tons of gold lease will be outstanding at the end of five years targeting 15,000-20,000 MSME jewellers. In terms of the larger market opportunity, we think we can bring down India’s gold imports by 20 percent through leasing,” Mathur said.

The product will initially be available only through SafeGold's website, before being rolled out to partner platforms in the coming quarter. The company will also soon extend this service to doorstep gold collection across the country.

For every 5 percent of yield received by a customer, SafeGold will charge a fee of 25 basis points. In the next 5-6 years, Mathur said that SafeGold is likely to clock in annualised revenues of Rs 300-400 crore through gold leasing.

How it works

SafeGold customers will be able to view the listed leases and commit at least 0.5 gm of their gold balance to the lease of their choice. The company said that it will facilitate the lease by physically transferring the gold from the customer’s account to the jeweller’s account through a traceable chain of custody, using India Good Delivery bullion.

At the end of the lease tenure, the jeweller settles the gold back into the vault, and SafeGold updates the customer balance. Customers have the option to re-lease, sell or take physical possession of their gold balance. Jewellers that will be listed on the platform will be vetted offline by SafeGold’s teams.

“We have an offline credit team that meets the jeweller and gets the required documents. It is like a traditional credit appraisal where you get all the financials, bank statements etc. We also do through our partner non-banking financial company (NBFC),” Mathur added.

However, the model is not currently regulated and is a first-of-its-kind move by SafeGold. Mathur said that the company has reached out to regulators seeking regulations around gold leasing and has also sought legal opinion on the model.

“We have written to the Finance Ministry, Reserve Bank of India (RBI), as well as the Securities and Exchange Board of India (SEBI). Our objective is to be regulated. We don't think that you can scale a product like this without having appropriate regulations,” he added.

SafeGold was founded in 2018 by Mathur who has previously worked with JP Morgan Partners and InVent Capital as an investor. Mathur is an alumnus of Indian Institute of Management, Ahmedabad.

SafeGold has over 100 partners globally and over 25 million customers. The platform said it has completed over 75 million transactions. The platform facilitates the storage of 24K physical gold online in a Brinks vault. The gold fraction can be bought and sold from the digital vault through partner platforms. Customers can also exchange their digital gold for jewellery via partner jewellers such as Tanishq, Caratlane, and Kalyan.