Gold loan companies growth may moderate: CRISIL

Posted By:
Subscribe to GoodReturns

Gold loan companies growth may moderate: CRISIL
Manappuram Finance: Quotes, News
BSE 74.50BSE Quote0.65 (0.87%)
NSE 74.25NSE Quote0.4 (0.54%)
Muthoot Finance: Quotes, News
BSE 300.90BSE Quote1.25 (0.42%)
NSE 302.60NSE Quote3.7 (1.22%)
Noted rating agency CRISIL, has said that new guidelines by Reserve Bank of India for gold loan companies, will moderate their growth and profitability.

"Business growth is likely to fall from 80% per annum to 20-25% per annum and return on assets (RoA) is expected to fall from the currently high level of 4.5% to 2.5-3%," the rating agency has said.

However, CRISIL is optimistic on the new RBI guidelines in the long run, as it believes that these rules will reduce the uncertainties and will help enhance stakeholders' confidence.

Moreover, the rating agency beleives that the new guidelines will boost strength of companies in the business, by improving the asset quality as there would not be much of an effect from the decline in gold prices.

It may be recalled that the RBI had reduced the loan-to-value(LTV) ratio to 60% for loans granted against the collateral of gold jewellery. India's central bank also said that gold loan companies should disclose in their balance sheet the percentage of such loans to their total assets.

This will shift the focus to unorganised sector, which are happy extending loans at higher LTV, it said.

CRISIL has rated five gold loan companies, including Manappuram Finance and Mutooth Finance which cover 90% of the assets and said that it will continue to monitor rated gold loan companies and their impact.

The shares of Manappuram was down by 8.25% at Rs 33.35 and Muthoot was down by 2.35% at Rs 143.25 on the BSE at 10.20 am IST.

GoodReturns.in

Read more about: gold, loan, crisil
Please Wait while comments are loading...
Company Search
Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

Thousands of Goodreturn readers receive our evening newsletter.
Have you subscribed?