The way Asset-based lending works is whenever you give a credit you actually look at the value of the asset. Let’s take gold as an asset example as we are focused on that. We look at gold and especially jewellery, Indians are sitting on a large amount of gold jewellery. When you evaluate the jewellery, one it has stones in it, two, you have to look at the purity of the gold. What we do is, whenever we look at the asset, we use a lot of technology behind the asset appraisal. For example, you take gold and rub it against a metal, when you rub it against a metal you have to look at the properties and colour change of the metal. It talks about the purity of gold. We take a lot of images to see how the colour changes, and how the transformation happens. We collect the net weight, we gather a lot of data and use this data to figure out what is the appraisal value of the gold. And getting the value right is very imp because from the regulation standpoint to manage the risk, you can’t give a loan beyond a certain point, for instance, there is LTV – loan to value ratio. Let’s say you have a gold value of 1 lakh, the RBI mandate says that we can’t provide more than INR 75000 as a loan amount, i.e, 75% is the LTV. If we don’t deter right, two things will happen. If we don’t appraise it right either we give more exposure where customers will not be able to pay back and the gold goes through an auction. We don’t customers to go through that experience, it is very daunting as there is an emotional value attached to it. And the other thing is, if you don’t appraise it right you are not giving enough value to the customer. You don’t want to be in either spot, you want to be balanced. You give the maximum loan value to the customer as well as ensure that the risk does not exceed. Ultimately you want every customer to get their gold back, we don’t want them to auction it.
How we appraise gold is when someone comes to us, we immediately arrange an agent and within 30 mins we send the agent to the customer and this agent takes a couple of minutes to take down customer details like the KYC and whatnot. The appraisal process itself takes about 30-40 mins – we weigh the gold, rub the metal, take pictures, and send the data to our control tower to figure out what is the appraisal value. What we are trying to do is essentially automate this entire process. What we are doing at Rupeek is to make it instant approval so that you don’t have to weight for half an hour. Let me tell you something that excites us, our vision to build gold loan machines just like ATM machines. So what do you do with ATM, you walk in, use your debit or credit card and walk out with the money. Similarly, we want people to walk in with their gold, deposit it and walk out with the money. We are about 2-3 years away from that because we are doing a lot of research as it requires automation of hardware, in terms of ML and imagery. It is not there in the world, we are the first ones doing it. And imagine if it goes to real estate assets, it gets even harder as gold is as good as a liquid asset comparatively. The moment you get into real estate it is very different.
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