Muthoot Finance, Manappuram stocks shine as RBI increases LTV on small gold loans to 85%; Check details

Shares of Muthoot Finance and Manappuram Finance soared 8% on the NSE after the RBI increased the loan-to-value (LTV) ratio for smaller gold loans of up to ₹2.5 lakh from the existing 75% to 85%, including interest.

Muthoot Finance stock surged 7.64% to an intra-day high of ₹2,470 apiece. Manappuram Finance shares also rose 5.92% to a day’s high of ₹248.46 on the back of the RBI’s MPC meet on Friday, June 6.

Increasing the LTV to 85% means that if borrowers use gold valued at ₹1 lakh as collateral, they would receive a loan worth ₹85,000, compared to ₹75,000 previously.

The new guidelines follow the RBI's April draft framework on gold loans, released after a joint supervisory review flagged several issues in gold lending by NBFCs.

In an April draft, the Reserve Bank had proposed to cap the LTV ratio at 75%, on the back of reports on LTV breaches, poor risk control, etc, in gold lending by NBFCs. Therefore, increasing the LTV ratio to 85% for small gold loans is a positive step.

RBI Governor Sanjay Malhotra also announced the removal of the credit appraisal requirements on small-ticket loans. He also added that end-user monitoring will only be done for loan applications under the priority sector lending (PSL) category.

At a broader scale, the RBI’s monetary policy committee (MPC) decided to cut the repo rate by 50 basis points to 5.5%, the lowest in three years. This was also RBI’s third consecutive rate cut.

At around 2:02 pm, Muthoot Finance shares were trading 7.33% higher at ₹2,462.90. Around the same time, Manappuram Finance stock stood at ₹246.89 apiece, rising 5.25%, outperforming NIFTY 50, which was up by 0.97%.

Muthoot Finance has a total market capitalisation of ₹98,876.54 crore, as of June 6, on the NSE. Manappuram Finance’s total market cap was at ₹20,897.63 crore.