With the Reserve Bank of India (RBI) tightening the rules for gold loan companies, Muthoot Finance has decided to diversify into the white label ATMs (WLAs) business.
The non-banking finance company, which is engaged in the business of financing against the security of gold ornaments, wants to leverage its network of 3,853 branches spread across 21 States and four Union Territories to set up WLAs.
The company’s board is of the view that setting up WLAs across all branches and in other business centres across the country would benefit Muthoot’s customers. Besides, it will also increase the company’s visibility and customer base in the long run. Market experts say the move to enter the WLA business may be aimed at countering the slowdown in the gold loans business. Further, it could also help in cash management.
To accelerate the growth and penetration of ATMs in the country, the RBI, in February 2012, decided to permit non-banks to set up, own and operate ATMs. The central bank said that the ATMs rolled out by non-banks would be in the nature of WLAs and would provide ATM services to customers of all banks.
Non-bank entities proposing to set up WLAs have to make an application to the RBI seeking authorisation under the Payment and Settlement Systems Act 2007. Such entities are required to have a minimum net worth of Rs 100 crore at the time of making the application and on a continuing basis after issue of the requisite authorisation.
Concerned about the systemic impact of their fast growth, the RBI tightened the rules for gold loan NBFCs in March 2012. These entities can now lend only up to 60 per cent of the value of pledged gold. Earlier, they could lend even up to 80 per cent of the value of pledged gold.
Further, the exposure ceiling for banks in a single gold loan NBFC was reduced to 7.5 per cent from 10 per cent of the banks’ capital funds.
Meanwhile, in a notice to its shareholders, Muthoot Finance said it proposes to increase the public shareholding in the company to 25 per cent.
As at September-end, the public shareholding in Muthoot Finance was 19.88 per cent.