Owning the Core: How Muthoot Finance Uses In-House Technology to Run a Gold Loan Network

In the gold loan business, most external variables are largely fixed. Loan-to-value ratios (LTV) are prescribed by regulators; Cost of funds operates within a narrow band. As a result, competitors function under similar regulatory and economic constraints. Consequently differentiation is difficult to achieve through traditional levers.

For Muthoot Finance, one of India’s oldest gold loan providers, technology emerged as the primary variable it could control.

Gold loans are operationally distinct from most financial products. Unlike home loans, vehicle loans, or consumer finance—where loan origination typically happens at the point of sale, such as a car dealership, a real estate developer’s office, or an electronics retail store—gold loans are executed entirely over the counter. Customers walk into a lender’s branch with physical gold, which is assessed, weighed, and valued on the spot, and receive funds immediately. This model makes the branch itself the point of sale, valuation centre, and vault, requiring systems that can handle high transaction volumes while simultaneously managing the custody, security, and accurate return of physical collateral.

Need For An Indigenous IT Platform

In 2001, the company secured an NBFC licence, enabling access to institutional borrowing and faster scale. However, technology limitations persisted. By 2009, with several hundred branches in operation, Muthoot had the following options: adopt an off-the-shelf core banking system or build its own. As branch count grew to 300–400, the limitations of disconnected systems became unmanageable. In 2009, Muthoot felt the need for a centralised core system—a core financial services system (CFSS).

“We evaluated off-the-shelf solutions but found they were built primarily for banks, covering products we didn’t need—savings accounts, deposits, treasury, credit cards. We were effectively being asked to pay for a Mercedes when we only needed a Maruti. Even the small portion we required would need heavy customisation,” said Eapen Alexander Muthoot, Executive Director, Muthoot Finance, who oversees the IT, Analytics and strategic Initiatives of Muthoot Finance and its subsidiaries.

The non viability for an off the shelf system to provide gold loans led the company to a clear conclusion. “We needed to build our own system. We started assembling an in-house technology team in 2009, spent about a year on groundwork, and launched our core system in mid-2010. For the first time, we had a unified general ledger,” said Muthoot.

What became clear very quickly was that, “without owning technology, there is no real differentiation—regardless of the product. Technology determines how a product is delivered and the resultant experience it offers to the customers,” said Muthoot.

In-house IT Teams At Muthoot

Today, the Muthoot group has a 400-member development team building applications in-house across products—gold loans, unsecured loans, loan against property (LAP), vehicle loans, housing finance, customer mobile apps, collections apps, and self-service digital journeys.

Our belief is simple, says Muthoot, “If technology is off-the-shelf, anyone can buy it. We don’t want to be an institution that only provides capital while someone else decides how loans are delivered. We want ownership of the entire delivery process.”

That philosophy continues to guide the company. Every new product is designed alongside its technology, with differentiation thought through from the start.

Eapen delves into the technology interventions in the gold loan business, “Gold loans are an intensely operational business. On an average day, Muthoot Finance executes around 4 lakh transactions across 5,000 branches, roughly 80 transactions per branch. This requires the ability to support massive concurrency. Unlike purely digital platforms, our operations combine digital systems with physical assets. We currently safeguard around 205 tonnes of gold, which translates to approximately 20.5 crore grams. Every single gram must be returned accurately. Technology is essential not optional to manage this level of operational precision and risk,” he said. 

The Muthoot group has implemented several layers of security, including AI-enabled CCTV systems, central surveillance, and centrally operated vaults. Vaults can only be opened with approval from the head office after verifying CCTV feeds to ensure no distress situation exists.

This was introduced after it was observed that most attempted thefts occurred during office hours. Removing vault control from branches was a critical technology-led decision.

Beyond security, valuation accuracy is crucial. Gold must be assessed without damaging it. To reduce human error, high-definition cameras record the valuation process, with footage centrally audited.

“These systems give us the confidence to operate in geographies with higher operational risk and weaker law-and-order environments. Technology enables both scale and control,” said Muthoot.

In a business where most competitive variables are externally determined, Muthoot’s long-term bet has been that control over technology rather than reliance on third-party platforms offers the most durable form of differentiation.