Traditional gold loan lenders largely unaffected by RBI actions, says Muthoot Finance MD & CEO

The company is also looking at 15 percent overall business growth in financial year (FY) 2024-25

Gold loan company Muthoot Finance’s managing director and chief executive officer George Muthoot said that traditional gold loan lenders which have a strong customer base are largely unaffected by the regulator’s action on gold loan firms.

“Traditional entities have a strong base of customers who trust them and they don’t find it difficult to build a customer base,” Muthoot said in a post-results interaction with Moneycontrol.

The Reserve Bank of India (RBI) in the recent past has hammered down on some of the shadow banks, especially those in the gold loan business. On March 4, RBI asked IIFL Finance to stop sanctioning or disbursing gold loans upon observing certain "material supervisory concerns" in the company's gold loan portfolio. IIFL Finance’s shares took a sharp knock the day after the regulatory action. "These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers," the RBI had said.

After this, the RBI on April 23, initiated the special audit of the company.

The disbursement of fresh gold loans has been suspended till "satisfactory completion" of the audit, IIFL Finance said in the release to exchanges.

The measure is part of the RBI’s supervisory action over concerns around certain loan disbursement practices and the finance and investment services company said it is extending full cooperation to the special audit team.

Growth plans

Muthoot said the company is looking at 15 percent overall business growth in 2024-25. The non-bank lender aims to grow its gold loan book by 15 percent. “We saw robust growth in FY24 of around 18 percent. Our gold loan portfolio grew by 15 percent in the last few years. And in FY25, we are looking at an overall growth of 15 percent,” Muthoot said.

Non-gold loan book expansion

Muthoot said that the company aims to increase its non-gold book, which includes small and medium enterprises (SME), loan against property (LAP) and microfinance, from the existing 15 percent to 20 percent.

“We plan to increase our non-gold portfolio to 20 percent in the next three-four years. We will be the main gold loan lenders and gold loans will be our focus,” Muthoot said.

Q4 performance

The company reported a 17 percent year-on-year increase in net profit at Rs 1,056.3 crore for the quarter ended March 31, 2024. Its net interest income (NII), which is the difference between the interest income a bank earns from its lending activities and the interest it pays to depositors, climbed 15.2 percent, and stood at Rs 2,134 crore compared to Rs 1,853 crore in the corresponding quarter of FY23. During the quarter, the company’s consolidated loan assets under management increased by 8 percent.

Also read: No worries over co-lending ties with IIFL Finance after RBI action: DCB Bank’s outgoing MD