Paytm Ex-Executives Launch New Venture in India

The Challenge of Credit Access in India

A significant portion of the Indian population lacks access to formal credit due to the absence of any established credit history or scoring mechanism.

Consequently, many individuals turn to informal lending sources, like pawn shops or recent loan apps, which often impose exorbitant interest rates – sometimes reaching 1,000% – and employ aggressive recovery tactics, even threatening contacts listed on the borrower’s phone.

Recent Concerns and Regulatory Action

Google recently removed hundreds of these problematic apps from the Play Store in India following reports of predatory practices.

However, the issue gained critical attention only after several individuals tragically took their own lives attempting to escape the harassment and shame associated with loan repayment.

Gold: A Traditional Store of Value

Throughout generations, Indians have consistently favored gold as a secure means of saving, often holding a portion of their wealth in this precious metal.

India’s demand for gold is unparalleled globally, making it one of the world’s largest importers of the commodity.

Gold as Both Savings and Collateral

Gold serves not only as a hedge against financial market volatility but also as an asset that can be leveraged for credit.

However, selling gold jewelry carries a social stigma, often perceived as a sign of financial desperation.

The Economic Impact of Stashed Gold

An estimated 25,000 tons of gold, valued at over $1.4 trillion, is currently held privately in India, largely locked away in homes.

Analysts suggest that monetizing even a third of this gold could boost the nation’s GDP growth by 2%.

indiagold: Digitizing Lending Against Gold

Deepak Abbot and Nitin Misra, former Paytm executives, identified an opportunity to address this issue by digitally transforming the process of lending against gold.

Previous government initiatives aimed at mobilizing stashed gold have met with limited success.

The Emotional and Practical Barriers

Misra and Abbot emphasize that gold holds significant emotional value for Indians, representing strength, pride, and familial heritage.

The process of selling gold, even in times of need, can be an embarrassing and uncomfortable experience due to the associated stigma.

A Doorstep Solution

Several firms have begun offering doorstep services to mitigate this stigma, but Abbot and Misra believe a more comprehensive solution is needed.

indiagold’s Innovative Approach

Abbot and Misra, shown above, are pioneering a new approach with their startup, indiagold.

Many Indians utilize bank lockers to safeguard their gold, incurring fees of up to $65 per month.

However, accessing these lockers can be time-consuming, they lack insurance coverage, and often involve security deposits and lengthy waiting periods.

Secure and Convenient Locker Service

indiagold offers a comparable locker service for as little as $1.36 per month, complete with full insurance protection.

The process involves agents visiting customers’ homes to inspect, weigh, and secure the gold in tamper-proof bags with RFID tracking.

Enhanced Security Measures

The bags are then placed in a steel box locked with the customer’s fingerprint, and the entire process is recorded via a body camera, streaming live footage to the customer.

With increasing crime rates, the security and insurance offered by indiagold are particularly appealing to customers.

Instant Access to Credit

Once deposited, the gold’s real-time value is displayed, and customers can access a line of credit within seconds.

Customers can choose to borrow against only a portion of their gold holdings, leaving other pieces secure for future use.

Interest rates on loans are capped at 1%.

Beyond Secure Storage: A Credit Platform

indiagold’s vision extends beyond secure storage; it aims to address the broader problem of credit access.

The startup has developed a platform to assess creditworthiness and provides APIs for banks and lenders seeking to tap into this underserved market.

Recent Funding and Future Expansion

indiagold recently secured $2 million in funding led by Leo Capital, with participation from prominent investors including Kunal Shah of Cred, Amrish Rau of PineLabs, and others.

“We think this is the only way this huge market can really be addressed, and now we are beginning to scale our efforts,” said Misra.