Shares of Muthoot Finance, IIFL Finance, Manappuram Finance, Cholamandalam Investment recovered partially on April 9 after RBI Governor clarified that he didn't mention tightening of gold loan norms during his April monetary policy speech.
Earlier on April 9, Malhotra said the central bank will soon issue comprehensive guidelines on loans against gold.
"Have never said that gold loan norms will be tightened," said Malhotra in a post-monetary policy press conference in Mumbai.
At closing on April 9, shares of Muthoot Finance recovered partially from 10% lower circuit, hit earlier in the day, to trade 7% lower. IIFL Finance shares also recovered nearly 6 percentage points to trade 2.5% lower at Rs 325 apiece.
Shares of Manappuram Finance closed 2% lower at Rs 224.81 after hitting day's low of Rs 221.76. Meanwhile, shares of Cholamandalam Investment closed 2% lower at Rs 1,433 after hitting day's low of Rs 1,390.
The guidelines for co-lending will now be extended to all regulated entities. Comprehensive guidelines will be issued for loans against gold and non-fund-based entities, said Sanjay Malhotra as part of his post-monetary policy speech.
Loans against the collateral of gold jewellery and ornaments, commonly known as gold loans, are extended by regulated entities for both consumption and income-generation purposes. In order to harmonise guidelines across various types of regulated entities, to the extent possible, keeping in view their differential risk bearing capabilities, we shall issue comprehensive regulations on prudential norms and conduct related aspects for such loans, the Governor said during his speech.
RBI lowered its key repo rate on Wednesday for a second consecutive time and changed its monetary policy stance signalling room for more cuts ahead, as it seeks to boost the sluggish economy, which is facing further pressure from US tariffs.
Shares of Federal Bank and CSB Bank also recovered on April 9 post-RBI Governor's announcement. Federal Bank’s gold loan forms nearly 15% of total and for CSB Bank, it’s more than 40% of total.
For IIFL Finance, gold forms 21% of total portfolio while for Manappuram and Muthoot Finance it stands at 50% and 98%, respectively.
Post-market hours, RBI released the draft rules, which proposed stricter guidelines for lenders disbursing gold-secured loans, aiming to enhance underwriting processes, improve collateral management and monitor the end-use of such funds.
RBI has proposed a raft of guidelines including establishing appropriate single-borrower limits and sectoral limits for lenders' gold loan portfolios, mechanisms to ensure end-use, 75% loan-to-value ratio and standards of gold purity.
Furthermore, lenders can renew or top up gold loans only if the existing loans are not stressed and the permissible loan-to-value ratio has some headroom, the central bank said.
The RBI also said one gold collateral cannot be used for two different loans simultaneously and also barred lenders from issuing loans if the collateral is re-pledged or its ownership is doubtful.
It also made it incumbent on lenders to use a standardised procedure across all its branches to assess the weight and purity of the gold collateral.
It has also mandated that lenders periodically monitor and maintain documentary evidence of how a borrower is using the loaned amount.
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