Gold loans have been one of the oldest forms of secured lending in India for centuries. Being a highly liquid asset, gold is the preferred collateral for many lending companies. Several financial institutions, including banks and NBFCs, have gold loans as an integral part of their business lending strategy.
Challenges Faced By Lending Institutions in 2021
Having gold as collateral makes it easier to process the loan, but this does not mean the entire process is free from challenges. Here are issues faced by the lending institution:
1. Administrative and Regulatory Controls
As per the latest news on Gold loan, RBI has reduced the value of gold as a loan from 75% to 60%, implying a reduction in the profit margins. This also means the loans need to be managed efficiently on the cost side. Only those lending institutions can sustain those who have a robust operating system.
2. Fluctuations in Gold Prices
Gold prices keep fluctuating as they are a global phenomenon. Companies that deal in gold loans must depend on a greater number of gold loans than the volume per loan to sustain profitability. However, a larger number of loans means more processing, more documentation, and more departmental staff, leading to increased cost. It is like a double-edged sword for gold loan operators.
3. Differing Repayment Schedules
Some customers prefer to make partial pre-payment to secure their pledged jewellery. Some other customers who cannot pay the principal choose to pay the interest and repledge the gold to pay off at a later date. This requires a separate workout of the repayment as per the customer’s needs. Using different software for each function can cause chaos at the back-end and potentially lead to fraud when listed at multiple sites.
4. Differing Requirements
Managing a gold loan is different from other loan products. One may think there is no need for credit assessment with gold being the collateral, it’s not always right. Also, managing a volatile product with fluctuating prices needs a dynamic operating ecosystem. The documentation system requirements are different considering the value of pledged gold jewellery has to be captured, storage records of gold have to be maintained, and terms need to be adjusted so gold value to the loan is breached.
These challenges can be eased through a customised gold loan management system that can streamline the entire process in one place, delivering useful functionalities with accuracy through its integrated features.
Must-Have Features of the Loan Management System For New Age Gold Loan Management
Let’s take a look at all the essential of any Loan Management System (LOS) for your lending business:
1. Customer Record Management
This enables the storage of all customer information in one place. The advanced search option makes it easy to retrieve key information and streamline all customer details like KYC documents, contact details, running loans, previous loan history, credit score and other details instantly. The AI-powered Document Recognition & Data Extraction Module helps track the inventory of pledged gold. The software acts as a single point, transparent, and easily portrays all facts and figures such as instalment date, overdue amount, etc. The research-driven system allows keeping track of details of nominees, transactions, and referees etc.
2. Loaning Process Automation
The entire loan life cycle becomes automated from start to finish. It leads to operational efficiency with a comprehensive enhancement of business management and reporting. The workflow-based decision making embedded in automated processes enable reduced TAT in loan disbursal. The optimised business processes provide a one-stop solution for data entry, gold details, valuation, and customer KYC. The advanced software also enhances customer satisfaction with customised and innovative offerings.
3. Automated Planning, Payment Tracking and Collection
Automation enables accuracy in interest calculation that helps avoid human-made errors and reduce the manual workload. The penalty capture feature recalculates interest on overdue loan amounts, thereby warning of potential defaults. Audit trails point out modifications to prevent frauds.
The tool should have auto-calculation abilities to ensure flexible interest and repayment options without much manual interference. The flexible interest and repayment options are specific to gold loans such as regular EMI, upfront, bullet, loan maturity on the anniversary, etc.
4. Integrated Accounting Engine
Integrated accounting management feature increases profits and reduces losses. The system with its loan rescheduling feature has several options, including repledging the gold and auctioning entry that eliminates the need for a separate accounting management software. The system maximises accuracy leading to improved profitability, efficiency, and competitiveness.
5. Flexible architecture
Lending institutions need to perform a huge load of calculations due to the varying repayment schedules, different requirements of each customer and fluctuating gold prices. The flexible architecture of the software encapsulates changing gold prices and recalculates the loan terms without error. The reduction in manual work increases the time available for business development, improving the long-term, thus increasing productivity and profitability. The state-of-the-art technology can capture gold prices, raise alerts, maintain storage records, handle regulatory compliance and manage risk mitigation measurements.
6. User management
The gold loan management system is an advanced way of managing customer databases and streamlining the loan process. It reduces turnaround time, overall costs, decreases risks, and enhances business profitability. The user management feature allows the user to log in to their account, view their account status, make payments and keep track of their loan. It reduces your effort as the customers can check and update their status through the portal.
7. Comprehensive Reporting and Analytics
The management software is a unique and user-friendly reporting structure that can churn out reports as per requirements. It can fulfil company requirements such as short term goals and work on long-term goals with data-backed intelligent analysis and reporting. It accelerates customer level satisfaction and enhances productivity.
A functional gold loan management system should seamlessly integrate different software modules to enable decision making and operational support to the banks, NBFCs and other lending institutions.
Finezza’s product suite is a customised solution for gold loan maintenance, valuation, and loan renewals. The integrated financial system enables the lending houses to manage the gold loan accounts and streamline the entire origination to maintain the gold loan cycle.
Reach out to us to maximise your returns by reducing manual work, improving efficiency and accelerating productivity with the aid of our comprehensive feature-rich gold loan management system.