Muthoot Finance pauses gold loans for a few days

Muthoot Group

MUMBAI: Muthoot Finance, one of the largest lenders in the gold loan segment, on Tuesday clarified that it had paused gold loan advances for three days from July 25-29 to “moderate” gold loan advances. Responding to news on the company stopping issue of fresh loans, Muthoot, in a regulatory filing, said it had resumed fresh loans on July 29.

“Gold prices have seen a huge spike in last two months and is on a record high as on date. In the last one month, we have been moderating our gold loan advances by reducing the maximum ‘Loan to Value’ (LTV) to 70 per cent of the gold price as against the RBI norms of up to 75 per cent,” the firm said. Currently, banks and non-banking finance companies can give 75 per cent of the gold value as the loan amount. Muthoot said inspite of reducing the value of loan to 70 per cent, its gold loan portfolio has been steadily growing in the last two months, from Rs 33,585 crore in March to Rs 35,800 crore as on July 24.

Bankers do not see any stress in gold loans as it is all secured loans of short duration, and currently, the gold prices are only moving up and not posing a risk to the value of the underlying security with them. “It is a secured loan, absolutely there is no concern. If RBI is giving certain concessions to farmers availing gold loans and a minister himself had complained about them not reaching farmers, there could be issues. I cannot comment on that,” said a banker.

Kerala’s agriculture minister V S Sunil Kumar has been raising the issue of non-farmers availing gold loans meant for farmers where banks provide a lower rate of interest on interest subvention scheme. Even after his recent meeting with the RBI governor, the minister had said over 62 per cent of farm loans against gold mortgage are taken by people for non-agricultural purposes, PTI said.

[“source=newindianexpress”]

, , , , , , , ,