Muthoot Finance, Manappuram jump 20% on LTV news

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Muthoot Finance, Manappuram jump 20% on LTV news
Muthoot Finance: Quotes, News
BSE 295.95BSE Quote5.8 (1.96%)
NSE 295.50NSE Quote6.4 (2.17%)
Manappuram Finance: Quotes, News
BSE 73.00BSE Quote1.2 (1.64%)
NSE 73.00NSE Quote1.25 (1.71%)
It was a whopping jump for shareholders of Muthoot Finance and Manapuram as both the gold loan companies saw their respective shares jumping 20 per cent, as the RBI hiked the loan to value requirements (LTV) to 75 per cent from 60 per cent.

Manappuram Finance was locked at the upper end of the circuit filter with only buyers at the counter. The stock had only buyers at Rs 18.15.

Similarly, Muthoot Finance also saw a 20 per cent circuit filter at Rs 128.90.

People seeking loan against gold jewellery can now borrow more, as the Reserve Bank on Wednesday allowed NBFCs to lend up to 75 per cent of the value of metal from 60 per cent at present.

"...it has been decided to raise the LTV ( Loan-To-Value) ratio to up to 75 per cent for loans against the collateral of gold jewellery from the present limit of 60 per cent with immediate effect," the RBI said.

This, it said, has been done in view of the moderation in the growth of gold loan portfolios of Non-Banking Financial Companies (NBFCs) in the recent past.

The RBI further said the value of the jewellery for the purpose of determining the maximum permissible loan amount will be only the intrinsic value of the gold content therein and no other cost elements (like making charges) should be added thereto. The intrinsic value is arrived in a particular way suggested by the RBI.
Hiking the ability to lend will benefit gold loan companies like Muthoot and Manapurram as the companies can now lend more, enhancing their business prospects.

With inputs from Dion Global Solutions

Read more about: muthoot, manappuram finance
Story first published: Thursday, January 9, 2014, 10:22 [IST]
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