Muthoot Finance lending arrangement with other Non-Banking Financial Company

Fast Finance Raigarh - Financial Advise - Muthoot Finance lending arrangement with other Non-Banking Financial Company

Muthoot Finance, the Indian gold loan company, is looking to form co-lending partnerships with smaller non-banking finance companies (NBFCs) to counter competition from banks. If the plan succeeds, Muthoot Finance will be the dominant partner in co-lending due to its strong capital position with a capital adequacy ratio of 33.29% as of December 2022. However, RBI regulations only allow co-lending arrangements between banks and NBFCs, not between two NBFCs. Muthoot Finance’s growth in gold loan assets under management (AUM) has slowed from about 32% YoY in December 2020 to about 5% as of December 2022, in the face of increasing competition from banks, which have been permitted to lend more against pledge of gold ornaments and jewellery during the Covid-19 pandemic. Muthoot Finance hopes to counter the competition through its operational efficiency, which includes collecting and storing gold, insuring against fraud and having its own staff go to the customer’s place. Muthoot Finance expects its non-gold loan business to grow to 15% in the consolidated loan AUM in a year and to 20-25% in three to five years.

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