1. Shares of gold loan firms plunge on RBI regulation

Shares of gold loan firms plunge on RBI regulation

The move by the RBI is being seen as a part of the government's efforts to make the country a less-cash economy. As of December 2016, cash disbursements accounted for about half of Muthoot’s gold loans and about 28% of its loans of ticket size of more than R1 lakh.

By: | Mumbai | Published: March 11, 2017 3:16 AM
The relevant threshold under the Income Tax Act, 1961 is R20,000,” the central bank said, while amending the provisions for disbursal of loan amount in cash by NBFCs. (Reuters)

Shares of gold loan companies plunged on Friday after the Reserve Bank of India (RBI) put a limit of R20,000 on cash disbursal of loans from the earlier limit of R1 lakh. Shares of Manappuram Finance, for instance, saw their biggest single day drop in almost three months after falling as much as 5.7% during the day’s trade. They finally ended the day 4.5% lower at R90.5/share. Shares of Muthoot Finance lost 3.9% in value to end the day at R337.95/share. At their lowest, they were down as much as 7.07%. “The relevant threshold under the Income Tax Act, 1961 is R20,000,” the central bank said, while amending the provisions for disbursal of loan amount in cash by NBFCs.

The move by the RBI is being seen as a part of the government’s efforts to make the country a less-cash economy.
As of December 2016, cash disbursements accounted for about half of Muthoot’s gold loans and about 28% of its loans of ticket size of more than R1 lakh. Similarly, according to VP Nandakumar, managing director and CEO of Manappuram Finance, cash accounted for 47% of the lender’s disbursements in October 2016, which had later dropped to as low as 34% post-demonitisation. But it is now back to close to the 50% mark.

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