Shares of Muthoot Finance Ltd. soared by up to 8%, while Manappuram Finance Ltd. and IIFL Finance Ltd. gained as much as 5%, following RBI Governor Sanjay Malhotra’s announcement on gold loan policy during the Reserve Bank of India’s recent press conference.
The Governor revealed that the Loan-to-Value (LTV) ratio for small gold loans up to ₹2.5 lakh per borrower will be increased to 85% from the previous 75%, inclusive of the interest component.
To illustrate, for gold valued at ₹1 lakh, lenders can now disburse ₹85,000 instead of ₹75,000 under the revised LTV norms.
Earlier draft regulations issued by the RBI had capped the LTV at 75% and set a 12-month limit for bullet repayments. These draft rules also required non-banking financial companies (NBFCs) to impose limits on their gold loan portfolios.
In response, brokerage Jefferies noted that although tighter LTV norms might slightly affect growth and provisions, the revised gold loan rollover rules are not as stringent as initially feared.
At the time of reporting, Muthoot Finance shares were trading 6.4% higher at ₹2,442.90. Manappuram Finance shares rose 2.9% to ₹241.48 but remained under the Futures & Options ban, preventing new position creation. Meanwhile, IIFL Finance shares increased 4.2% to ₹447.40.
