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If rates are steady, gold loan NBFCs may see 28% growth

Tuesday, April 25, 2017
Economic Times

Gold loan NBFCs such as Manappuram Finance and Muthoot Fincorp are expecting a growth of 15-28% in the current financial year in business if gold prices stay the way they are, and there are no major disruptions to the domestic and global economy.

They also expect growth in the overall gold loan business to take some time to get back to earlier levels as the informal sector, which bore the brunt of demonetisation, is yet to fully recover from its impact.

“Gold prices have been showing firmness since January 2016 and it has certainly helped in the growth of business since then. But the growth momentum was interrupted with the demonetisation announcement and the consequent cash shortage affected our normal operations for a while. Since then, the cash situation has improved, but the sector is yet to get back to its feet. Therefore we may have to wait for some time for growth of gold loans to get back to earlier levels," said VP Nandakumar, CEO, Manappuram Finance. “A growth of 10%-15% is achievable assuming gold prices hold steady at current levels, and hopefully there are no major disruptions to the domestic and global economy, “he said.

Pledging gold as collateral has been a regular feature of India's gold market.