India?s largest gold loan lender Muthoot Finance Ltd?s loan growth will slow down to 10-15 % this year from over 50% last year after Reserve Bank of India clamped down on gold loan rules for the NBFC sector with tighter regulations, top executives said on the sidelines of a conference.
In March, RBI capped the amount gold loan firms can lend against gold at 60% besides raising the capital requirement from 10% to 12% by April 2014, as it was concerned about the sector?s rapid increase in balance sheets and physical presence. Leading gold lenders like Manappuram Finance Ltd and Muthoot have seen loan portfolio increasing by 50-100% percent in the last few years.
“The slowdown is not because of demand. We have done this consciously to give comfort to regulators. We were growing at 50-55% that made the regulators think is there something wrong,” George Alexander Muthoot, managing director of Muthoot Group, said.
The loan growth in the second quarter is expected to be “marginal”, while most of the growth is seen to in the second half of the year. However, the loan growth in third and fourth quarter is not expected to touch heights seen in the last fiscal.
Muthoot, which opened about 900 branches in the last two fiscal, will open only 200-300 branches this year to limit its expansion as it feels the regulator in India are bothered by their rapid expansion and growth of the sector.
The NBFC, which holds over 50 percent of gold loans out of 45,000 crore book held by all NBFCs, expects regulators to be more relaxed going forward, as they have submitted all the reports.
“Now I think they have understood (the NBFC gold loan business) and we should do better,” Alexander said.
The company plans to grow at about 20-30% from the next fiscal as it feels that by then their NBFCs gold loan business model would be well understood. Muthoot?s net interest margin is about 9-10 percent and it expects to maintain that for the rest of the year. Muthoot, which issued non convertible debentures thrice last year, said this fiscal they may not need to borrow as much as last year as they are expecting to a slowdown in lending.
“We may not require more funding this year. But if the market becomes better then we may come up with one more NCD,” said Oommen K Mammen, Kerela-based group?s CFO.
