Digital Gold Leasing: The New Asset Class in Town
Unpacking the risks, rewards, and hidden complexities of Digital Gold Leasing in India.
This article delves into the emerging concept of Digital Gold Leasing, a modern twist on digital gold investments that allows investors to earn returns by leasing their gold to jewellers. It unpacks how these unregulated products are marketed with promises of attractive yields, the complexities of their regulatory ambiguities, and the potential conflicts of interest arising from interlinked business relationships. Drawing on recent cautionary examples from similar unregulated investment products, the piece aims to equip readers with the necessary insights and due diligence tips to navigate this innovative yet risky financial landscape.
Gold has always held a special place in the hearts—and vaults—of Indian households. With India being the largest private holder of gold globally, most of it remains locked in physical forms like jewellery. While the government attempted to offer alternatives through the now-discontinued Sovereign Gold Bond (SGB) scheme, the high costs to Government made it unsustainable despite its benefits to investors.
In recent years, FinTech companies have entered the fray, introducing a new way to own gold: Digital Gold. The idea is simple—users can buy gold online in fractional amounts without the hassle of physical storage. Unlike traditional gold purchases, which require a significant lump sum investment, digital gold allows people to invest in small increments—daily, weekly, or even through spare change from online transactions (a trick borrower from Chinese tech giant Alipay). For instance, if a customer makes an online purchase for ₹995, the app rounds it up to ₹1000, using the extra ₹5 to buy digital gold. This seamless, almost invisible method of investing has made digital gold an attractive option, especially for younger investors. By the way, if you think that how much can this trick work, well it made Alipay the owner of largest money market mutual fund in China.
The gold you buy is reflected in some digital form on the FinTech app and the actual gold is stored by FinTech entity on your behalf in some vault, at least that is the claim.
Now, FinTechs have taken this innovation a step further—with the introduction of Digital Gold Leasing. There are several FinTech players which have entered this space like Gullak.Money, Safegold and Jar.Money.
Is Digital Gold Really Backed by Physical Gold?
FinTechs offering digital gold claim that every gram you purchase is backed by actual physical gold, stored securely in vaults with reputed refiners like MMTC-PAMP and others. In theory, this means your digital holdings are not just numbers on a screen—they represent tangible assets held on your behalf.
However, there’s a catch. Digital gold is an unregulated product—it doesn’t fall under the purview of any financial sector regulator like SEBI (Securities and Exchange Board of India), RBI (Reserve Bank of India), or IRDAI (Insurance Regulatory and Development Authority of India). In fact, in 2021, SEBI explicitly prohibited stockbrokers from offering digital gold, citing concerns over allowing regulated entities to deal in unregulated products.
Does "unregulated" mean illegal? Absolutely not. These platforms may be operating within legal boundaries. However, if something goes wrong—whether it’s a dispute over ownership, delayed redemption, or operational issues—your only recourse is through the Indian judicial system. And as anyone familiar with court proceedings knows, that process can be a long and exhausting journey. In fact, since it is unregulated, there is no one to verify that the physical gold actually exists - you are relying on the goodwill of the FinTech entity.
This regulatory vacuum leaves consumers in a gray area, making it essential to exercise caution and understand the risks before investing in digital gold.
Enter Digital Gold Leasing: Making Idle Gold Work
If your digital gold is sitting idle in a vault—why not put it to work? That’s exactly the idea behind Digital Gold Leasing, the latest innovation from FinTech companies.
To understand how this works, let’s take a quick detour into the world of Indian jewellers.
Jewellers in India operate in a business where gold itself is the primary raw material—and given the high price of gold, their working capital needs are substantial. They require a continuous supply of gold to craft jewelry, which is then sold to customers. Interestingly, jewellers often prefer loans in gold rather than cash because it reduces their exposure to gold price fluctuations.
Recognizing this need, Indian banks have long offered "Gold Metal Loans"—a system where banks lend physical gold to jewellers instead of cash. The government even launched the Gold Monetisation Scheme (GMS) in 2015, allowing households to deposit their unused gold with banks. This gold would be melted, loaned to jewellers, and in return, depositors would earn interest and eventually receive gold upon maturity. However, the GMS failed to gain widespread traction. Why? Because for most Indian households, gold isn’t just a financial asset—it holds emotional and cultural value. The idea of melting family heirlooms didn’t sit well with many, making the scheme unpopular.
Now, here’s where FinTechs saw an opportunity. Since digital gold is already stored in secure vaults, why not let people lease it out to jewellers and earn interest?
Through Digital Gold Leasing, the gold you purchase on their platform—which is typically kept with some vault —can be leased to jewellers who need it for their operations. In return, you earn interest on your digital gold holdings, turning your idle asset into a yield-generating investment.
For FinTechs, this model has a dual advantage—not only does it create a new revenue stream, but it also helps them offset the storage costs associated with keeping large quantities of gold in vaults.
It’s a win-win—at least on paper. But as with any new financial innovation, there are risks and nuances to consider.
Is Digital Gold Leasing a Peer-to-Peer Lending Activity?
At first glance, Digital Gold Leasing might sound a lot like Peer-to-Peer (P2P) lending—and for good reason. Both models involve individuals lending their assets through a platform to others in need.
In the traditional P2P model, individuals like you and me lend money to borrowers via specialized platforms such as Liquiloans or LenDen Club. This is a regulated activity under the purview of the Reserve Bank of India (RBI), and any entity facilitating P2P lending must hold an NBFC-P2P license.
However, the P2P lending industry itself has been under scrutiny. In August 2024, RBI introduced tighter regulations in response to concerns about opaque practices and mismanagement within the sector. These regulatory actions have significantly curtailed the growth of the P2P lending industry, raising concerns for both investors and platforms.
So, is Digital Gold Leasing just another form of P2P lending?
At a structural level, yes—it mirrors P2P lending. You, as an investor, are effectively lending your gold to jewellers through a FinTech intermediary in exchange for interest. But there’s a crucial legal distinction:
In P2P lending, you’re lending money, which falls squarely under RBI’s regulatory framework. In gold leasing, however, you’re lending gold, which currently operates outside any formal financial regulation.
This distinction was recently also adopted by SafeGold, a major player in the digital gold space. In a newly added FAQ section on their website—seemingly prompted by a detailed piece by The Ken—SafeGold clarified that lending gold does not constitute P2P activity under existing regulations (See: Source).
For now, this interpretation provides a regulatory loophole, allowing gold leasing platforms to operate without the same oversight imposed on P2P lending. But with increased regulatory focus on FinTech innovations, it remains to be seen whether this loophole will remain open. In fact, both the major players (Gullak and Safegold) have clauses in their agreement that in case there is some regulatory change by RBI in future, it may have some costs/ disruption to the service.
Also, as mentioned earlier, this is also akin to a Gold Metal Loan (GML) which banks are allowed to do in India (even NBFCs/ Insurance Companies cannot offer such a loan). Whether RBI is comfortable in FinTech entities enabling individuals to offer such a loan product, is a question which only RBI can answer. And even if they are not comfortable, what options they have and how willing they are to stop this - no one can say.
The Problem with How Digital Gold Leasing Is Marketed
As mentioned earlier, unregulated does not mean illegal—but the real concern lies in how these products are being marketed. Some FinTechs, in their quest to attract customers, use misleading language that could give investors a false sense of security.
Take Gullak.Money as an example. Their homepage prominently claims:
“Earn extra over 11% market returns by leasing it with our trusted jewellers.”
At first glance, this suggests a fixed, high-yield return—a tempting proposition for any investor. However, what they fail to disclose upfront is that this 11% figure is based on historical gold returns over the past five years. Gold prices are notoriously volatile, and returns can swing widely—even into negative territory. Presenting these figures without clear disclaimers blurs the line between projected returns and guaranteed income—a distinction any responsible financial product should make clear - UPFRONT.
And it doesn’t stop there.
In their FAQ section, under the question “Is Gullak Safe?”, they offer a seemingly reassuring response:
“Yes, Gullak is 100% safe. We are partnered with yespay for secured payment gateways & Gullak is built by the makers of BHIM. We use UPI autopay by NPCI & follow all RBI guidelines. Your money is invested in 24K 999 pure gold provided by Augmont, which is NABL and BIS accredited and a member of India Good Delivery standard on NSE, BSE and MCX. This Gold is stored in 100% safe and secured Sequel Vaults monitored by SEBI-registered IDBI Trusteeship.”
This carefully crafted response may be technically accurate but contextually misleading.
When they claim to follow RBI guidelines, they are almost certainly referring to payment regulations—which are irrelevant to the actual gold leasing product. Further, they mention SEBI-registered IDBI Trusteeship, but what they do not mention is that SEBI only regulates specific activities of Debenture Trustees - which fall within the domain of capital markets and not the other activities which they may be providing. In fact, last year SEBI proposed that these Debenture Trustees hive off part of their business which is not regulated by regulators (See: Moneycontrol Article).
By name-dropping RBI and SEBI, they create the impression that the product itself enjoys some level of regulatory oversight, which it does not.
And the part on "Augmont”, keep that in mind, we will come back to it in a while.
For those willing to dig deeper, the final FAQ on their page offers a rare moment of transparency:
“No, Gold+ (gold leasing) is not a regulated product. You may not have a regulatory recourse in an unfortunate scenario of you suffering a loss.”
It’s an important admission, tucked away at the very end—a place many users may never reach. And let’s not forget, even digital gold itself is unregulated, meaning both the asset and the leasing arrangement exist in a regulatory gray zone.
Is it All?
The attempts to project regulatory legitimacy don’t stop with vague references to RBI and SEBI guidelines. When you try to invest through the Gullak.Money app, it prompts you to enter your PAN (Permanent Account Number) with this message:
“PAN verification is mandatory to credit interest, according to RBI guidelines.”
At first glance, this sounds like a legal requirement backed by the Reserve Bank of India—but there’s a glaring problem: RBI does not regulate digital gold or gold leasing products. So, why would the RBI mandate PAN verification for interest payments on an unregulated product? And that too even when the interest is not being credit in your bank account in form of cash. As per their own website, the interest is paid in grams of gold. There is no legal basis for tying PAN verification to this process under RBI guidelines. It appears to be yet another attempt to project a false aura of regulatory approval, subtly reassuring users that the platform operates within official frameworks—when it clearly does not.
(I am not sure why RBI choses to sit silent on these aspects)
Is Your Gold Really Safe? The Truth About Guarantees
When you lease your digital gold to jewellers, you’re essentially acting as a lender—and with lending comes the risk of default. What happens if the jeweller fails to return your gold (if it actually exists in physical form) or pay the promised interest?
To ease these concerns, platforms claim:
“Jewellers provide security in the form of Bank/Corporate guarantees to protect the investment, covering 100% of the gold leased.”
On the surface, this sounds reassuring. But let’s break it down:
Bank Guarantee (BGs): This is a relatively secure instrument issued by a bank, ensuring that if the jeweller defaults, the bank will cover the loss. However, it’s unclear which banks are providing these guarantees.
Corporate Guarantee (CG): This is where things get murky. A corporate guarantee means another company (often related to the borrower) promises to cover the default. But what if both the jeweller and the guaranteeing company face financial trouble? This is known as wrong-way risk—when the entity providing the guarantee is just as likely to fail as the original borrower.
Even if the corporate guarantor is a separate entity, enforcing this guarantee is not a simple task. If the guarantor refuses to pay, your only option would be a lengthy legal battle—likely through the Insolvency and Bankruptcy Code (IBC) or other mechanism, which can stretch on for years with uncertain outcomes.
The platform offers no clear details on who these corporate guarantors are or how robust these protections really are, and how much the platform will commit in enforcement of such guarantees—leaving investors in the dark about the true level of risk.
The Fine Print Tells a Different Story
The glossy marketing claims of security and guaranteed returns fall apart when you dig into the detailed contractinvestors must sign before participating in gold leasing. Here are two crucial clauses (see Terms and Conditions available on website of these entities - similar terms exist in all):
“The Company is merely providing a platform to its Users to facilitate the transaction of sale and investment of Gold and will not be liable in any manner with respect to the products and/or services offered by the respective Business Partners.”
“In no event shall the Company be liable to You for any loss or damage that may cause or arise from or in relation to these Terms of Use and/or due to use of this App/Platform or due to investments made using this App/Platform.”
In simple terms:
They disclaim any liability for what happens to your gold once it’s leased.
If there is fraud, default, or loss, you are on your own—your only recourse is through the Indian court system.
This language is not unusual in financial agreements, but the disconnect between the marketing promises and the legal disclaimers is striking. It raises serious concerns about how transparent these platforms are about risks.
To their credit, SafeGold appears to be more transparent in their disclosures. They clearly mention that gold leasing is not regulated, and their FAQ section addresses some key risks more openly. However, the underlying concerns about regulatory gaps, credit risks, and the lack of investor protection apply equally to them.
Interconnected Interests: A Perceived Conflict?
Remember earlier, where we highlighted Gullak.Money’s association with Augmont that “money is invested in 24K 999 pure gold provided by Augmont”. Here is why it is relevant. When you explore their Gold Leasing product, you discover three jewellers on offer—as of the date of writing—namely, Auspicious by RSBL, Veer Jewellers, and Kanak Ratna. While I have nothing to say for last two, let’s take a closer look at the first option: Auspicious by RSBL.
RSBL, short for RiddhiSiddhi Bullions Limited, is a leading gold and silver trading firm in India and is prominently featured as the default option on the platform, offering a higher return (4-5%) compared to 3% from other jewellers (to nudge people to choose it?). What isn’t immediately disclosed is that Augmont, the provider of the gold, has a very close association with RSBL—they are owned by the same people and share several directors (as can be verified on the MCA website. Go to https://www.mca.gov.in/content/mca/global/en/mca/master-data/MDS.html and search for both companies and see their directors).
This intertwined relationship could lead to a perceived conflict of interest. Here’s how:
Compromised Guarantee Enforcement: Gullak.Money highlights that Augmont secures the gold leasing with bank or corporate guarantees from the jeweller. However, if Augmont and RSBL are closely connected, questions arise about whether Augmont would be willing—or even able—to enforce those guarantees strictly in the event of a default. Essentially, the same group that benefits from the higher returns might be less incentivized to take decisive action against its own affiliate.
Risk of Favoritism: With overlapping ownership and directorship, decisions that affect one entity might inadvertently favor another. This could lead to situations where the mechanisms designed to protect investor interests, such as guarantee claims, might not be as robust when dealing with related parties.
Extended Network Concerns: Adding another layer to this web, there’s Finkurve Financial Services Limited (doing business as “Arvog”), an RBI-registered NBFC primarily engaged in gold loans, which also lists Augmont GoldTech as its partner - though I could not find any disclosure on Augmont’s website highlighting its association with Finkurve - is it a violation of RBI Guidelines, I am not sure but it is quite strange that it will not mention the name of the lender for which it is sourcing loans. In any case, the presence of multiple, interlinked entities raises concerns about whether conflicts might influence risk management practices across the board.
Moreover, this interconnected structure means that when an individual purchases digital gold through the platform, the money is funneled to Augmont, which uses the funds to acquire physical gold. This gold is then leased to RSBL—a closely tied entity with overlapping ownership and management with Augmont. In effect, the investor is indirectly extending credit to RSBL. Some might argue that this arrangement mimics the process of RSBL raising deposits from the public—a highly regulated activity—and serves as a clever method to bypass stringent regulations like those under the BUDS Act. This setup not only blurs the lines between asset investment and credit extension but also raises concerns about transparency and the true risk exposure for investors.
It’s important to emphasize that these are perceived conflicts of interest. While the connections suggest potential areas of concern—especially in the enforcement of guarantees—these risks may not necessarily materialize in practice. Nevertheless, such opaque linkages highlight the need for greater transparency so that investors can fully understand the relationships that might impact their investments. What this article demands and investor should also demand from these entities is more transparency and honesty in their dealings with customers.
Conclusion
As new avenues like digital gold leasing emerge, the promise of high returns can sometimes overshadow inherent risks. Unregulated products, while not illegal, often lack the safety nets and robust oversight that come with traditional, regulated investments. This absence of regulation means that in case of disputes or defaults, your only recourse might be lengthy and uncertain legal proceedings—leaving investors exposed and bearing the burden of risk.
A recent case involving Falcon Invoice Discounting serves as a stark reminder of these perils. Many investors suffered significant losses when a seemingly attractive, unregulated product failed to deliver on its promises or was a outright fraud and ponzi scheme. Such instances underscore the importance of performing thorough due diligence before parting with your hard-earned money. Always scrutinize the fine print, understand the true nature of the returns being offered, and proceed with caution when navigating unregulated investment landscapes.
Stay curious. Feel free to reach out at myelinbridge@proton.me