By Nishit Navin
BENGALURU (Reuters) -Indian gold loan financier Muthoot Finance said on Wednesday the central bank’s proposed gold loan regulations, particularly the loan-to-value (LTV) ratio limit, could drive borrowers away from formal lenders and into the hands of unregulated players.
Last Month, the Reserve Bank of India put forward tighter guidelines for lenders disbursing gold-secured loans, aiming to enhance underwriting processes, improve collateral management and monitor the end-use of such funds.
The central bank proposed a LTV ratio limit of 75% which would apply throughout the loan tenure and not just at origination — a move analysts say would effectively make the product less attractive to borrowers.
“In the last 20-30 years, with lots of efforts, non-banking financial companies have been able to bring customers from the unorganized sector to the organised sector,” said George Muthoot, managing director at Muthoot Finance, in a post-earnings conference call.
“But if the NBFCs are limited through tweaks in LTV as suggested in the draft guidelines, it will take back these customers to the (unorganized) money lenders.”
Muthoot said the Association Of Gold Loan Companies have made their representation to the regulator, highlighting these concerns.
Earlier in the day, the company beat fourth-quarter profit estimates, aided by strong loan demand amid high prices of the precious metal.
Muthoot Finance’s profit for the January-March quarter was 15.08 billion rupees ($176.6 million), compared with analysts’ average estimate of 14.91 billion rupees as per data compiled by LSEG.
Its standalone loan assets under management rose 43% year-on-year to 1.09 trillion rupees at the end of the quarter.
($1 = 85.2680 Indian rupees)
(Reporting by Nishit Navin; Editing by Varun H K and Krishna Chandra Eluri)
