RBI nod boosts gold loan firms’ shares | business | Hindustan Times
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RBI nod boosts gold loan firms’ shares

business Updated: Jan 03, 2013 21:59 IST
HT Correspondent

Shares of gold loan companies Muthoot Finance and Manappuram Finance surged by up to 20% on Thursday after the Reserve Bank of India (RBI), in a draft report released on Wednesday, said that financial performance, asset quality and borrowings of gold loan companies were not a cause of concern.

“Gold loan firms have significantly underperformed Bankex (Muthoot Finance by 30% and Manappuram Finance by 80% over last one year) due to regulatory overhang,” said Kunal Shah, analyst, Edelweiss Securities. “With the Rao Committee report reaffirming the systemic importance of gold loan non-banking financial companies (NBFCs), the overhang will subside.”

Shares of Manappuram Finance hit the upper circuit by surging 20% to close at Rs. 40.6 on the Bombay Stock Exchange, while Muthoot Finance shares rose 10% to close at a new high of Rs. 230. http://www.hindustantimes.com/Images/Popup/2013/1/04_01_biz3.jpg

“The financial performance of gold loans NBFCs and the current level of their borrowings from the banking system are not of significant concern,” the report said. “There appears to be no immediate systemic implications in terms of domestic financial stability due to the interconnectedness of gold loans NBFCs and banking system.”

“The release of the report will remove the negative perception created in the market about gold loan business,” said George Alexander Muthoot, managing director, Muthoot Finance. “Gold loan companies' role in monetising and creating liquidity for the gold available in the country has been appreciated in the report.”