Gold loan rates are unlikely to decrease for borrowers, despite the Reserve Bank of India’s (RBI) repo rate cut in January, as stated by George Alexander Muthoot, managing director of Muthoot Finance. In a recent interview, Muthoot indicated that the cost of funds is expected to decline only slightly, which he believes will not lead to lower lending rates. “The cost of funds may decrease by about 5-10 basis points, but I don’t anticipate lending rates to drop by such a minimal amount,” he remarked. He also mentioned that the company would maintain a margin of 10.0-10.5%.
Muthoot Finance, the largest gold loan provider, reported a 33% year-on-year increase in net profit for the third quarter, reaching ₹1,363 crore. The company’s net interest income rose by 42.8% year-on-year to ₹2,721.4 crore, up from ₹1,905.7 crore in the same period last year. The firm added 1.37 million new customers in the past nine months, attributed to improved customer acquisition strategies.
Following the strong third-quarter results, Muthoot’s shares surged over 6%, hitting a new 52-week high of ₹2,321.80 on the BSE. Muthoot credited the earnings growth to robust demand for gold loans and rising gold prices. He noted, “There is strong demand as credit from other sources has diminished in recent months, including fintech lending, unsecured loans, and microfinance.”
In contrast, Muthoot experienced a significant decline in microfinance lending during the third quarter. The assets under management for its subsidiary, Belstar Microfinance, fell to ₹87,032 crore at the end of December, down from ₹96,253 crore at the end of September and ₹1 trillion at the end of March 2024. Muthoot stated, “Our microfinance business will be on hold for the next three to four quarters. All microfinance companies are facing challenges, leading to a moderation in credit.
