Manappuram, Muthoot Finance shares rise by up to 20% on RBI proposal

Share prices of gold loan finance companies on Thursday soared up to 20 per cent on an RBI report recommendation that companies be allowed to lend 75 per cent against the value of gold pledged, against 60 per cent at present.

Manappuram Finance surged 19.97 per cent to touch the upper circuit limit of Rs 40.55 on the BSE.

Muthoot Finance zoomed up by 17.87 per cent during the day and finally closed at Rs 230, up 10.21 per cent.

"Shares of Manappuram Finance and Muthoot Finance rose sharply on RBI panel's proposal that gold loan firms be allowed to lend 75 per cent against the value of gold pledged, against 60 per cent now," Milan Bavishi, Head Research, Inventure Growth & Securities said.

"Any kind of increase in loan to value ratio works in benefit for these companies as it helps to increase revenue potential," Bavishi said.

A draft report by a working group set up by the RBI under the chairmanship of K U B Rao has recommended a review of the cap on the loan-to-value ratio of gold loan non-banking finance companies (NBFCs) to 75 per cent. Currently, the ratio for gold loans by NBFCs is capped at 60 per cent.

"As gold loan NBFCs have already braced for conforming to all regulatory stipulations, the 'loan to value ratio' can be broadly increased to 75 per cent," said a report of the Working Group on Gold.

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