No evidence if Manappuram, Muthoot Finance benefited from RBI's ban on IIFL Finance: Morgan Stanley

So far this year, shares of IIFL Finance tumbled over 17 percent

The Street was anticipating gold loan peers Muthoot Finance and Manappuram Finance to benefit from RBI's ban on IIFL Finance's gold loan business six months back. However, there is no evidence yet to suggest that both peers Muthoot and Manappuram benefited fundamentally from this move, said Morgan Stanley analysts in a recent note.

On September 19, the RBI lifted restrictions placed on IIFL Finance's gold loan business. These restrictions had prevented the company from sanctioning, disbursing, or selling its gold loans.

Earlier this year, the ban was imposed in response to compliance issues highlighted by the RBI, aimed at ensuring IIFL's adherence to regulatory standards. By suspending its gold loan services, the RBI sought to encourage the company to strengthen its internal controls and governance.

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In recent months, IIFL has taken corrective measures to address the concerns raised by the regulator. With the successful implementation of these actions, the ban has now been lifted.

IIFL Finance has affirmed its commitment to maintaining the highest standards of compliance to prevent future regulatory issues. The lifting of restrictions is a welcome relief for both IIFL and its clients, as it restores access to the gold loan market—a key component of IIFL's business model.

Whether or not other gold loan players like Muthoot Finance and Manappuram Finance benefited from this move still remains a question, however both saw their stock prices surge up to 37 percent so far this year owing to rising gold prices.

Muthoot Finance, particularly, benefited significantly from the gold price upmove and hence could be at a higher risk of giving up gains. Moreover, the company is more sensitive to changes in gold loan business prospects and gold prices compared to Manappuram, added Morgan Stanley analysts.

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