Muthoot Finance, one of the major gold loan companies, said in a statement that the company's gold loan assets under management (AUM) was around Rs.24,000 crore and the approximate value of jewellery with the company more than Rs.40,000 crore, indicating that the loan-to-value (LTV) ratio was below 60 per cent. As a matter of abundant caution, the company had been progressively reducing the lending rate per gram as a risk management measure, seeing the volatility in gold prices during the last couple of months, the statement added.
The Reserve Bank of India, on Thursday, issued a notification asking all non-banking finance companies to maintain an LTV ratio not exceeding 60 per cent for loans granted against the collateral of gold jewellery. It has also directed the NBFCs to disclose in their balance sheet the percentage of such loans to their total assets.
Manappuram Finance, another prominent NBFC, said in a statement that the average LTV offered by the company on its gold loans amounted to 66 per cent. As a result of RBI's latest directive, the LTV offered by the company would come down to be on a par with the guidelines.
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With the proposed consolidation of the company's branch network and consequent optimisation of operating expenses at the branch level, the impact of the reduction in LTV on yield would be mitigated, the statement said.
V. P. Nandakumar, Executive Chairman of Manappuram Finance, said, “We are of the opinion that the new RBI measures will ultimately strengthen the well-capitalised established players in the business with sound operating and risk management practices. It addresses the risks to the sector arising from the entry of multiple new players lacking the experience or the required understanding of the nuances of the business.”