Muthoot Finance slips 14% in 2 days on RBI's new rules for gold loans

The Reserve Bank of India has proposed new rules to streamline gold loan practices, aiming to bring more transparency and control as lending in this segment grows rapidly.

Shares of Muthoot Finance have continued under pressure for the second straight trading day, and slipped 8 per cent to ₹1,964.35 on the BSE in Friday’s intra-day trade in an otherwise firm market. In the past two trading days, the stock price of the gold finance company has plunged 14 per cent after the Reserve Bank of India (RBI) proposed new rules to streamline gold loan practices, aiming to bring more transparency and control as lending in this segment grows rapidly. 

 

Muthoot is one of the largest players in the gold loan market, focusing on loans against gold jewelry.

 

 

At 09:29 AM; Muthoot Finance stock was trading 6 per cent lower at ₹2,016. In comparison, the BSE Sensex was up 1.5 per cent at 74,952. The counter has seen huge trading volumes, with a combined nearly 1 million equity shares changing hands on the NSE and BSE. The stock had hit a record high of ₹2,444.65 on March 20, 2025.

 

Loans against the collateral of gold jewellery and ornaments are extended by regulated entities (REs) for both consumption and income-generation purposes. With a view to harmonising such regulations across REs while keeping in view their risk-taking capabilities, and to address a few concerns that have been observed, it has been decided to issue comprehensive regulations, on prudential norms and conduct related aspects, for such loans, the Reserve Bank of India (RBI) governor Sanjay Malhotra said on April 9, 2025.  ALSO READ | TCS slides as Q4 profit dip prompts analysts to cut target price

 

A uniform Loan-to-Value (LTV) cap of 75 per cent will apply to all gold loans, and bullet repayment loans must maintain this ratio on the full amount due at maturity. If the LTV stays breached for over 30 days, lenders must make an extra 1 per cent provision. Loans can’t be renewed if they breach LTV at maturity. Importantly, gold loans taken for income generating purposes must be classified by actual use, and lenders must document and monitor how the funds are used.

 

Harmonisation in gold loan regulations could impact strong growth momentum in the gold loan business, thereby resulting in correction in gold loan NBFCs, ICICI Securities said in a note.

 

Meanwhile, earlier this month, global rating agencies, S&P Global Ratings and Moody’s Ratings, upgraded the long-term issuer ratings of Muthoot Finance with a stable outlook. Moody’s Ratings said the upgrade of Muthoot's ratings reflects its strong credit profile, supported by its leading franchise and solid track record in the gold financing industry in India.  ALSO READ | Cipla share price jumps 5% as USFDA okays cancer drug Paclitaxel

 

“This reflects our view that the company will maintain its excellent capital and earnings over the next 12 months while benefiting from the strengthening regulatory environment, particularly for upper-layer fincos in India,” said S&P Global Ratings. The ratings agency expects some stress in the asset quality of Muthoot's microfinance subsidiary, in-line with the industry. That said, S&P Global Ratings expects the company to maintain overall asset quality, thanks to the dominance of its highly collateralised gold loan portfolio.