Muthoot Finance, Manappuram shares surge up to 8%; here's why gold loan financiers are surging

Shares of the country's leading gold loan providers, Muthoot Finance and Manappuram Finance rose as much as 8.70% and 4.33% in an otherwise subdued market.

The surge in these shares came after Finance Ministry suggested easier gold loan norms for small borrowers of up to ₹2 lakh. On the National Stock Exchange, Muthoot Finance shares rose as much as 8.60% to hit an intraday high of ₹2,243. Manappuram Finance stock advanced as much as 4.87% to ₹242.

The Finance Ministry on Friday said it has examined the draft guidelines on gold loan by the Reserve Bank and suggested exclusion of small borrowers of up to ₹2 lakh from the provisions of the proposed norms amid opposition from a section of political parties in Tamil Nadu.

The Reserve Bank of India (RBI) on April 9 issued comprehensive draft guidelines on gold loans with a view to harmonise regulatory framework to enhance underwriting, improve collateral management and monitor the end-use of funds.

It also proposed that all loans classified against gold will have a loan-to-value ratio of not more than 75% of the value of gold.

Draft Directions on Lending Against Gold Collateral issued by the RBI have been examined by the Department of Financial Services (DFS) under guidance of Finance Minister Nirmala Sitharaman and the DFS has given suggestions to the central bank to ensure that the requirements of the small gold loan borrowers are not adversely affected, the finance ministry said in a post on X.

The DFS has also stated that such guidelines will need time to implement at the field level and hence may be suitable for implementation from 1st January 2026 only, it said.

Further, it said, "The DFS has suggested that small ticket borrowers below Rs 2 lakh may be excluded from the requirements of these proposed directions to ensure timely and speedy disbursement of loans for such small ticket borrowers."

The RBI is reviewing the feedback received on the draft guidelines and expected that concerns raised by various stakeholders, as well as the feedback received from the public, will be duly considered by the RBI before finalising the directions on the same, it said.

A section of political parties and farmers' associations in Tamil Nadu opposed the draft guideline of the RBI on gold loans.

Tamil Nadu Chief Minister M K Stalin also wrote to Finance Minister Nirmala Sitharaman urging her to advise the RBI to reconsider the proposed restrictions in the new guidelines.

As of 12:15 pm, Muthoot Finance shares traded 8.09% higher and Manappuram Finance advanced 3.88%, outperforming the NIFTY50 index which was trading with a negative bias.