Muthoot, Manappuram shares partly recoup losses
CL Jose
KOCHI: The recent RBI directive asking non-bank finance companies (NBFCs) extending gold loans to limit their cash disbursal within Rs20,000 need not necessarily affect the gold loans business at large.
Talking to businessbenchmark.news, KR Bijimon, the general manager of Muthoot Group, the largest gold loan player in the country, said he doesn’t understand why the RBI move should affect the ongoing business of gold loan companies.
“Who, after all, insist on carrying cash? A big chunk of the gold loan business has been taken over by online regime, and as everyone knows, the disbursals above Rs2 lakh are anyway being done online,” Bijimon explained.
The Manaoppuram Finance CEO, VP Nandalumar, also ruled out any particular impact from the new RBI move. The market has been taken by surprise after shares of both Manappuram Finance and Muthoot Finance tumbled on stock markets by about 8 per cent yesterday (Thursday) though many dismissed the market response as a too-hyped knee-jerk reaction.
Shares recouping losses
The market is slowly realizing the meaninglessness of the exaggerated response to the RBI move yesterday. Today (Friday) when the markets closed, Manappuram recouped part of its loss by gaining 5.13 per cent before closing at Rs174.30 on NSE, whereas Muthoot shares rose 4.02 per cent on NSE to close at Rs1662.70.
Nandakumar was quoted as saying that his company’s 50 per cent of transactions are done through the highly popular product – Online Gold Loan that follows a fully paperless process of application and disbursement.
Manappuram is viewed as the pioneers of online gold loan disbursal among the players from the organized sector though most large companies are currently pushing for this mode of business.
Bijimon said the number of deals done through the UPA platform is also increasing by the day. “This is a business that essentially holds itself to transparency by the very nature of the business. Needless to say, most transactions go through AML screening,” he added.
Under pressure for funds
This is a time when the gold loan business is coming under increased scrutiny, as more and more banks rely heavily on this asset class for secured and better returns. Simultaneously, it requires minimal capital investment.
Gold loan companies are said to be coming under increased pressure for procuring funds, as the largest contributor to their fund base, banks themselves, are frantically seeking ways to build their liability book to match their loan growth.
