Gold financiers extended their rally in trade on Monday, June 9, as the Reserve Bank of India released its final guidelines for gold loans, which includes an increased LTV (loan-to-value) ratio to 85 percent.
The LTV indicates the percent of value that a borrower can receive for their gold. The RBI has raised the loan-to-value ratio to 85 percent for gold loans up to Rs 2.5 lakh and to 80 percent for loans between Rs 2.5 lakh and Rs 5 lakh.
Loans above Rs 5 lakh will continue to have a 75 percent LTV cap, including interest. For smaller loans, paperwork is now simpler, no credit checks are required, and end-use restrictions apply only if the loan is treated as priority sector lending.
Further, the RBI is enforcing stricter renewal rules, borrowers must repay interest and meet credit checks before renewal or top-up. Lenders now need to clearly disclose all charges, including gold assaying and auction fees, in loan documents. This is a significant step toward greater prudence, transparency, and borrower protection, benefiting all NBFCs, particularly gold loan providers.
These guidelines will apply uniformly to all the regulated entities doing gold lending, including banks, SFBs, and NBFCs. These gold lending guidelines have to be complied with as expeditiously as possible but no later than April 2026.
At 11.30 am, Muthoot Finance was trading at Rs 2,540, higher by 3.8 percent, while Manappuram Finance was quoting Rs 253.25 per share, up 2.3 percent. Over the past month, shares of the gold finance players have surged 14 percent and 10 percent, respectively.
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Motilal Oswal noted, "While there will be a minor impact on the disbursement LTVs of gold loan NBFCs, they can be significantly mitigated by incentivizing customers to repay interest at 1M/3M/6M intervals and by introducing select products with loan tenors of 6 months"
The brokerage added, "We believe that the implementation of the final guidelines will intensify competition between banks and NBFCs, as the regulatory parity on LTV norms will erode the regulatory arbitrage that NBFCs had in offering higher disbursement-LTV gold loan."
Further, the brokerage added that its ratings and estimates on Muthoot Finance, IIFL Finance and Manappuram Finance are unchanged since it always believed that the gold lending guidelines would not have any significant impact on gold loan growth over the medium to long term.
International brokerage Morgan Stanley sees Muthoot Finance and Manappuram Finance among the key gainers from the latest developments. The brokerage maintained its 'equal-weight' rating on both, while Shriram Finance and Bajaj Finance, which are also expected to benefit from the RBI's final norms, currently have an 'over-weight' rating.
The brokerage is also optimistic about Muthoot Finance compared to its peers, believing that the stock still has upside potential as result of its strong earnings outlook for the first quarter and FY2026 overall.
In the case of Manappuram Finance, although it could benefit as well, Morgan Stanley expects the stock's movement to remain capped near the open offer price of Rs 236 set by Bain Capital, at least until the transaction is finalised.
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