Tech giant Google has announced that it will tie up with Aditya Birla Finance, Muthoot Finance to offer personal loans and gold-backed loans, respectively. This was announced at the 10th edition of its flagship Google for India event.
Google announced that the partnership seeks to enhance credit availability in a market where conventional lending frequently misses the mark. Despite the advancements in financial inclusion efforts, obtaining credit continues to be a hurdle for numerous Indians without profiles in local credit bureaus.
Google’s partnership with Aditya Birla Finance aims to improve access to credit for individuals and merchants in India. This collaboration aims to provide loans starting at Rs 10,000 ($120) to support financial needs.
A report published by HSBC highlighted that gold maintains a special place in the Indian market. Approximately 1 billion individuals in India invest around Rs 1 lakh crore each year on gold imports, which is more than 20% of the worldwide mine production.
Unlike China, where a significant part of the gold demand originates from high-income groups, in India, a considerable percentage of this demand arises from households with lower income levels. Moreover, a large number of Indians possess gold already, which gives them better access to credit facilities at reduced interest rates.
Sharath Bulusu, the director of product management for Google Pay, told TechCrunch that Muthoot is responsible for managing, storing, and safeguarding customers’ gold, as well as providing credit extension services. On the other hand, Google’s role is to connect potential users with the lender.
Bulusu emphasized the significance of a gold-backed solution in enhancing credit availability in India. He highlighted that Google’s project leverages the cultural, emotional, and economic significance of gold, presenting opportunities for a vast number of individuals to access formal credit channels.
“The beauty of this is that it creates a stepping stone for them [the users] to get access to more,” he said.
“It’s the first loan that they will take and it gives them a credit report. In the future, they still have the option to take collateralised loan because we have seen that some users repeatedly, even after they have started to build a credit history, choose collateralized loan because of the lower interest rates and familiarity with it,” he said.
Gold loans enable borrowers to pledge their gold jewellery or coins as collateral to obtain financing. This form of credit facilitates swift access to funds since lenders can assess the gold’s worth promptly without extensive credit assessments.
In contrast, personal loans represent unsecured financing options that grant borrowers a one-time sum of money repayable within a predetermined period. These loans serve diverse purposes such as covering medical crises, funding travel expenses, renovating homes, or managing debt consolidation efforts.
Google Pay is a prominent payment application in India, playing a key role in processing transactions on the UPI platform. Developed by Indian banks, UPI is the preferred method for online payments among Indian users, driving a majority of digital transactions in the country.