Gold loan rates are not likely to come down for borrowers even as the Reserve Bank of India (RBI) cut the repo rate in January, according to George Alexander Muthoot, managing director (MD) of Muthoot Finance.
In an interview with Mint, Muthoot said that cost of funds is likely to come off only marginally and, therefore, he does not expect that to translate into lower lending rate.
“Cost of funds may come down by some 5-10 basis points. I don’t expect lending rates to come down by such a small amount,” said Muthoot. “We will, however, maintain margin at 10.0-10.5%,” he added.
A basis point is one-hundredth of a percentage point.
Q3 growth
The largest gold loan company had seen a 33% year-on-year jump in net profit in the third quarter to ₹1,363 crore during the corresponding period last year. The company’s net interest income surged 42.8% year-on-year to ₹2,721.4 crore from ₹1,905.7 crore during the corresponding period last year. The gold loan financier added 1.37 million new customers in the last nine months of the year, owing to better customer acquisition processes.
Shares of Muthoot jumped over 6% on Thursday after the company reported strong third-quarter results, touching a fresh 52-week high of ₹2,321.80 apiece on the BSE.
Muthoot attributed the growth in earnings to strong demand for gold loans, along with the rise in gold prices.
“There is a strong demand as credit from other sources have dried up over the past few months, including from fintech lending, unsecured and microfinance lending,” he said.
Meanwhile, Muthoot saw a sharp drop in microfinance lending in the third quarter. The assets under management of its subsidiary Belstar Microfinance stood at ₹87,032 crore at the end December compared with ₹96,253 crore at the end of September and ₹1 trillion at the end of March 2024.
“Our microfinance business is going to be on hold for the next three, four quarters. All microfinance companies are having issues. So, everybody is moderating their credit,” he said.