Posted on April 9, 2025, by Niftynews
Shares of Muthoot Finance, IIFL Finance, and other major gold loan companies took a significant hit on April 9, 2025, as RBI Governor Sanjay Malhotra announced that the Reserve Bank of India (RBI) would soon release comprehensive guidelines for loans against gold. This news caused the stock prices of these companies to drop by up to 10%.
At 11:05 AM on April 9, Muthoot Finance saw its shares fall by 10%, trading at Rs. 2,063 per share. IIFL Finance and Manappuram Finance also saw their shares drop by 8% and 3%, respectively, while Cholamandalam Investment & Finance saw a decline of 4.7%, reaching Rs. 1,395 per share.
What Did RBI Announce About Gold Loans?
During his post-monetary policy speech, RBI Governor Sanjay Malhotra stated that the central bank will soon issue comprehensive guidelines for gold loans. These loans are provided by banks and Non-Banking Financial Companies (NBFCs), such as Muthoot and IIFL, and are secured against gold jewelry and ornaments.
The RBI has extended the co-lending guidelines to include all regulated entities, meaning that gold loans will now be subject to stricter regulations across all institutions offering them. Malhotra explained that the new regulations would harmonize norms across entities while considering their varying levels of risk exposure. He mentioned that these guidelines would address both provisional norms and conduct-related aspects of gold loans.
Impact on Gold Loan Companies
The RBI’s move comes at a time when gold-backed lending has been growing significantly, especially with companies like Muthoot Finance and IIFL Finance heavily involved in the segment. According to reports, Muthoot Finance and Manappuram Finance have a substantial portion of their portfolio in gold loans—98% and 50%, respectively.
As a result, the news has raised concerns among investors about how the new guidelines might affect the operations of these companies. IIFL Finance reports that gold loans make up 21% of their portfolio, while Federal Bank and CSB Bank also saw their stock prices fall due to the potential impact of the new regulations.
What Do These Guidelines Mean for Investors?
The RBI’s announcement is seen as part of an effort to harmonize the regulations across different lenders and improve risk management within the gold loan industry. However, the immediate market reaction shows concern among investors about how these guidelines might affect profits for gold loan-heavy companies like Muthoot Finance and IIFL Finance.
Investors are particularly concerned about the higher regulatory scrutiny and the potential for stricter lending norms, which could limit the growth of these companies in the future. As many of these businesses rely heavily on gold-backed loans for revenue, such guidelines could lead to a slowdown in their ability to scale these operations.
Stock Performance of Gold Loan Companies
Following the RBI announcement, stocks of companies that provide gold loans experienced significant declines:
- Muthoot Finance shares fell by 10%, reaching Rs. 2,063.
- IIFL Finance saw its shares drop by 8%.
- Manappuram Finance’s shares were down by 3%.
- Cholamandalam Investment & Finance Co Ltd saw a 4.7% dip, trading at Rs. 1,395.
As the news continues to affect stock prices, investors are looking closely at the potential impacts of these new regulations on future growth.
What’s Next for Gold Loan Companies?
Despite the immediate drop in stock prices, the market will closely watch how Muthoot Finance, IIFL Finance, and others adapt to the new RBI guidelines. While these companies have shown resilience in the past, the evolving regulatory environment could pose challenges.
It’s essential for investors to stay updated on the comprehensive guidelines to understand how they will reshape the gold loan industry. For now, investors should closely monitor any updates from the RBI and consider consulting with financial advisors to reassess their positions in the affected stocks.
