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Photographer: Dhiraj Singh/Bloomberg Photographer: Dhiraj Singh/Bloomberg

When Vijay Mhatre needed cash to make up a shortfall for his son’s engineering school tuition, he pledged his wife’s necklace and bangles. Instead of going to the nearest pawnbroker or bank, the 55-year-old called Rupeek Fintech Pvt Ltd., summoning a representative of the online gold lender to his 650-square-foot Mumbai apartment and sidestepping the ignominy of being seen pawning the family jewelry.

A motorcycle-borne loan agent from the startup arrived within the hour. He used a computer vision-aided testing kit to appraise the metal’s purity. A team 600 miles away crunched data to complete the background check and process the loan electronically. About 30 minutes later, 200,000 rupees ($2,800) had been deposited in Mhatre’s bank account by one of Rupeek’s partners, an Indian private lender called Federal Bank. The startup’s 24/7 control room turned on the risk-monitoring system to track the agent, ensuring he securely deposited the jewelry at the bank’s nearest vault.

After being appraised on-site, jewelry is packaged and taken to a vault for safekeeping. Photographer: Dhiraj Singh/Bloomberg

Indians have a particular attachment to gold; rural farmers and the urban working class alike invest their savings in the precious metal and flaunt jewelry at weddings. Gold, with a price that’s spiked almost 18% this year, is both an insurance policy and a retirement plan in a country that lacks robust social welfare systems or widespread access to formal credit. “We don’t have a lot of gold,” says Mhatre, who works as a cashier at a financial-services company. “I gifted these gold ornaments to my wife five years ago. I want to get this gold back to my wife in two years by repaying the loan.”

Indians stockpile more of the precious metal than citizens of any other country, and their hoard is seven times the amount of gold mined globally in 2018. Now, Bangalore-based Rupeek is giving the centuries-old business of gold lending an internet-aided makeover to help Indians cash in on the 25,000 tons of the metal the World Gold Council estimates they’ve stashed away. Backed by two of Silicon Valley’s most powerful venture capital firms, Sequoia Capital and Accel, the startup allows people to borrow money against their hoard, often built up from wedding gifts or inherited from their families. “Indians have a mind-boggling $1 trillion worth of gold sitting in their homes, several times the gold in Fort Knox,” says Sumit Maniyar, Rupeek’s founder and chief executive officer.

Consumer Demand for Gold in 2018 In metric tons Data: World Gold Council

It’s essentially a dead asset that’s a drag on the country’s economy, Maniyar says: “Monetizing even a third of the gold stash could add 2% to the GDP growth rate. It could be the hidden lever to aid the government’s vision of making India a $5 trillion economy by 2025.”

Rupeek started making the loans in 2016. Borrowers pay annual interest rates of 10.6% to 20%. That’s higher than the 10.5% to 12% interest a bank might charge in India, but its home service and quick payouts remove the stigma of pawning family gold. Rupeek also doesn’t charge appraisal fees that a bank might or deduct the sort of upfront fees a pawnshop might.

For now, Rupeek is the only app-based, home-pickup company for gold loans. It’s aided by India’s large banks, which lack the resources or the creativity to chase borrowers but are eager to diversify their loan portfolios by tapping gold lending. At the same time, India’s informal lending sector has been hit by a credit crunch after a 15-month shadow banking crisis has choked credit lines to small and weak borrowers, making alternative players such as Rupeek more important. “There’s an unprecedented demand for gold loans,” says Gayathri Parthasarathy, a partner and national financial-services head at KPMG India Pvt Ltd. “People are struggling for credit as the nonbanking lending industry has been stung by a liquidity crunch.”

Vanita Vivek Patre, 49, sits in her house as Rupeek agents process a gold loan. Photographer: Dhiraj Singh/Bloomberg

Indians are mistrustful of strangers handling their gold, so Rupeek’s agents stay at the borrower’s home or office until the money arrives in their account. Pawnshops can often deduct 25% of the loan upfront before dispensing it or charge interest rates as high as 48%, essentially making gold-backed loans a debt trap for the poor.

“The industry is tainted by bad practices,” Maniyar says. “People have the impression that gold loan companies are evil and snatch their gold away.” Yet, Maniyar says, his startup can barely keep up with demand. Monthly lending rose from $1.5 million in January to $16 million in September. Rupeek declined to give specific revenue and profit figures.

Most borrowers belong to India’s emerging middle class; they’re raising cash for an unexpected hospitalization or an education expense, or are small-business owners looking to tide over working capital requirements. One borrower in Bangalore produced two sackfuls of gold and asked for a 10 million-rupee loan. Rupeek had to quickly arrange for an army of appraisers and an armored vehicle. There’s also a growing millennial population, including employees of Google, Amazon, and Flipkart, who want to fund a vacation, make a down payment on a home, or get around a bad credit score. To avoid letting gold purchased with unaccounted cash make its way into the banking system through gold loans, the company collects the tax identification number of borrowers and reports its transactions to tax authorities.

A Rupeek agent weighs gold jewelry at Vijay Mhatre’s house in Mumbai. Photographer: Dhiraj Singh/Bloomberg

The startup says it doesn’t dispense loans other than at the borrower’s office or home. It also doesn’t accept as collateral broken mangalsutras, the traditional chain that a groom ties around his bride’s neck to sanctify their marriage. Indian cities are rife with mangalsutra-snatching crimes, and Rupeek doesn’t want to handle stolen gold.

To expand its reach, Rupeek is introducing a “gold locker” product to hook consumers who are queasy about the words “gold loan.” A user can deposit his ornaments in a gold locker and borrow against them. The company is also testing a mobile-based debit card that’s linked to the gold stored. And it’s counting on new tieups with foreign nonbanking financial companies such as Credit Saison of Japan’s Mizuho Financial Group to expand outside India. Maniyar says, “We want to be the pipe for all kinds of gold monetization in India and beyond.”

Maniyar stumbled onto digital lending almost by accident. His family runs a generations-old business trading in seeds, and after he finished engineering school, he worked briefly for JPMorgan Chase & Co. before returning to the family fold. When the business needed a loan to expand, even offering a family property as collateral wasn’t enough to satisfy the bank. He went on to found Rupeek, hoping to help others counter the country’s confined credit markets by tapping Indians’ huge trove of gold.

The business isn’t without pitfalls. A man called in Rupeek’s agents to pawn a heap of his wife’s jewelry to quickly raise capital for his business. Agents tested the metal and found all the ornaments were fake except one. The borrower was despondent, saying all the jewelry—save the sole genuine piece given by his parents—was from his in-laws. —With Swansy Afonso