Shares of gold finance companies such as Muthoot Finance and Manappuram Finance are trading lower by up to 10% on BSE after the Reserve Bank of India (RBI) tightened regulations governing non-banking finance companies (NBFCs) lending against gold jewellery.
The recommendations of the Working Group, in so far as they relate to NBFCs lending against the collateral of gold jewellery, have been broadly accepted by the Bank, RBI said in a notification.
The new rules include strict documentation for high value loans against gold and prohibition of misleading advertisements by NBFCs such as offering availability of gold loans in a matter of 2-3 minutes.
The Central Bank said, it is henceforth mandatory for NBFC to obtain prior approval of the RBI to open branches exceeding 1000. However NBFCs which already have more than 1000 branches may approach the Bank for prior approval for any further branch expansion. Besides, no new branches will be allowed to be opened without the facilities for storage of gold jewellery and minimum security facilities for the pledged gold jewellery.
RBI has also asked NBFCs to make the auction process of the gold more transparent by disclosing the details of auction process in the annual report, including full details of the value fetched in the auction.
Among the individual stocks, Muthoot Finance has tanked nearly 10% at Rs 102, while Manappuram Finance was down 3.4% at Rs 15.70 on BSE.
The recommendations of the Working Group, in so far as they relate to NBFCs lending against the collateral of gold jewellery, have been broadly accepted by the Bank, RBI said in a notification.
The new rules include strict documentation for high value loans against gold and prohibition of misleading advertisements by NBFCs such as offering availability of gold loans in a matter of 2-3 minutes.
The Central Bank said, it is henceforth mandatory for NBFC to obtain prior approval of the RBI to open branches exceeding 1000. However NBFCs which already have more than 1000 branches may approach the Bank for prior approval for any further branch expansion. Besides, no new branches will be allowed to be opened without the facilities for storage of gold jewellery and minimum security facilities for the pledged gold jewellery.
RBI has also asked NBFCs to make the auction process of the gold more transparent by disclosing the details of auction process in the annual report, including full details of the value fetched in the auction.
Among the individual stocks, Muthoot Finance has tanked nearly 10% at Rs 102, while Manappuram Finance was down 3.4% at Rs 15.70 on BSE.
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