Manappuram, Muthoot Finance up 20% as RBI eases gold norms

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Shares of gold loan financing companies like Manappuram Finance and Muthoot Finance rallied 20 percent each on Thursday after the Reserve Bank of India (RBI) revised norms for non-banking finance companies (NBFCs) lending against gold jewellery.

The central bank on Wednesday hiked loan-to-value ratio (LTV) to up to 75 percent for loans against the collateral of gold jewellery from the present limit of 60 percent with immediate effect.

With this, the people seeking loan against gold jewellery can now borrow more money.

"...in view of the moderation in the growth of gold loan portfolios of NBFCs in the recent past, and also taking into consideration the experience so far, LTV hiked," the RBI said in its release.

The central bank further said the value of the jewellery for the purpose of determining the maximum permissible loan amount will be only the intrinsic value of the gold content therein and no other cost elements (like making charges etc) should be added thereto. The intrinsic value will continue to be arrived as per way suggested by RBI.

NBFCs had raised apprehensions on certifying the purity of the gold jewellery accepted as collateral on grounds that under the current practices it was possible only to arrive at the proximate purity of the gold and that such a certification could lead to dispute with the borrowers.

However, RBI clarified that the need to give a certificate on the purity of gold cannot be dispensed with.

The certified purity shall be applied for determining the maximum permissible loan and the reserve price for auction. The NBFCs can, however, include suitable caveats to protect themselves against disputes on redemption, RBI said.

For some borrowers, it may not be possible to produce receipts establishing ownership, especially when the jewellery has been inherited.

RBI clarified that the ownership verification need not necessarily be through original receipts for the jewellery pledged but a suitable document may be prepared to explain how the ownership was determined. It is particularly in each and every case where the gold jewellery pledged by a borrower at any one time or cumulatively on loan outstanding is more than 20 grams.

"NBFCs are directed to have an explicit policy in this regard in their overall loan policy," the central bank said.

At 10:14 hours IST, Manappuram Finance was trading at Rs 18.15, up 19.80 percent and Muthoot Finance was locked at 20 percent upper circuit at Rs 129.10 on the BSE.