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GOLD FINANCING STOCKS

January 19, 2014

Shares of gold financing firms Muthoot Finance and Manappuram Finance today surged up to 20 per cent after the Reserve Bank allowed NBFCs to lend up to 75 per cent of the value of metal from 60 per cent at present. Muthoot Finance's scrip soared 19.98 per cent to Rs 129.10 -- its upper circuit limit on the BSE. Similarly, shares of Manappuram Finance shot up 19.80 per cent to touch its highest trading permissible limit for the day at Rs 18.15 . "...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 development is positive for gold loan companies like Muthoot Finance and Manappuram Finance , as earlier norm of 60 per cent LTV had resulted in moderation of loan books for these companies," Angel Broking said in a report. "It also appears that regulator is now comfortable with the loan books of these NBFCs and want them to play an active role in monetisation of idle gold in the country," the report said.


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Source: Pakistan & Gulf Economist


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