Muthoot Finance expects to recoup, in the next two-three quarters, the business it lost to the unorganised sector in the last two years or so as the central bank has relaxed the restriction on the amount of loan that non-banking finance companies can give against the pledge of gold jewellery.

According to George Alexander Muthoot, Managing Director, Muthoot Finance, the company lost almost 14 per cent of its business to the unorganised sector after the RBI, in March 2012, restricted the amount of loan that non-banking finance companies can lend to 60 per cent of value of the gold jewellery pledged.

RBI norms

The RBI has now allowed the NBFCs to lend up to 75 per cent of the value of the gold jewellery pledged.

After the RBI restriction on lending, the company’s business declined from Rs 25,500 crore in March 2012 to about Rs 22,000 now. “The regulator now has more comfort with the business model of gold loan companies,” said Muthoot.

Gold purity

He emphasised that the RBI stand on the need to give a certificate on the purity of gold to customers and the method of establishing ownership of gold jewellery are hygiene factors in the lending business and are welcome.

(This article was published on January 10, 2014)
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