Funds may have become tighter, but gold loan business will find ways to operate within the existing regulatory/monetary environment.

This is how Mr Thomas John Muthoot, Chairman and Managing Director, Muthoot Fincorp, a leading player based in Kerala, assesses trends in the industry.

Mr Muthoot said this while giving an update on the business post the central bank's clamp-down on loan-to-value ratio and access to bank funds for gold loan companies.

“We cannot deny that post the revised regulations, there has been some impact in loan volumes, given the reduced loan-to-value (LTV) ratio,” Mr Muthoot told Business Line .

Muthoot Fincorp follows the 60 per cent LTV norm and already has a capital adequacy of 15 per cent. The requirement is 12 per cent by April 1, 2014.

GROWING DEMAND

The LTV offered by banks may now be comparatively higher than that of NBFCs. But procedural delays associated with the latter are a deterrent for small borrowers. Given that most customers look at quick and easy disbursals as an important criterion, customers are attracted to us,” Mr Muthoot said.

“We welcome the RBI's intervention, since it brings more discipline into the industry; of course, some needy borrowers may have been happier with a higher LTV.”

The capital adequacy (12 per cent) and LTV (60 per cent) norms will strengthen the long established and well-managed companies in the industry.

It will also curb undue competition brought in by recent entrants into the industry.

“We have seen growing demand for gold even when prices have risen steadily over the years. Given this scenario, the outlook for gold loans as a sector is positive.”

CUSTOMER SERVICE

Customer service has been one of the key differentiators.

This would help Muthoot Fincorp not only to retain customers but also to attract new ones.

Accessibility is another key criterion and, given the wide network, it is now easier for customers to reach us, Mr Muthoot said.

vinson.kurian@thehindu.co.in