The branches will stop functioning after three months and no new loans will be disbursed from these branches. However, existing customers are given three months to close their loan account and get their gold ornaments back.
By Vinayak Aggarwal & Rajesh Ravi
The tussle between Muthoot Finance and Centre of Indian Trade Union (CITU) in Kerala does not seem to be anywhere near an end, as the non-banking financial services company on Monday announced that it would shut 43 out of its 623 branches in the state as employees continued to protest.
In an analyst call on Monday, managing director of Muthoot Finance, George Alexander, said that the closure would not affect business. He said the business is affected for the last two years due to the trade union activities and talks of strike. The share of business from Kerala in total gold loan business has been coming down from 12% in 2017 to 4.5%.
The branches will stop functioning after three months and no new loans will be disbursed from these branches. However, existing customers are given three months to close their loan account and get their gold ornaments back. Besides this, if a customer wants to continue his loan, it will be accessible through their mobile app and in-person at some other nearby branch. Some of the company’s employees have also joined hands with the trade union in last three years under the outfit named ‘Non-Banking & Private Finance Employees Association’, the company said.
The employees are on an indefinite strike since August 20, the company said in an exchange filing. The lender also claimed that the majority of its employees, who are apparently not part of this strike, are unable to open branches because of the threats and forcible closure.
This announcement comes after the lender in its exchange filing on August 29 said that it had taken a decision to close those branches because of some action taken by some CITU workers. The lender’s business in Kerala is 4.57% of its total gold loan portfolio – that is Rs 1,600 crore of total gold loan business of Rs 35,000 crore. The 43 branches, which are shutting account for about Rs 100 crore of loans. Although, the company started its business operations from Kerala and has over 13% of its branches in the state, it claims that business volumes in the state are low. The lender’s average gold loan outstanding per branch in the state is around Rs 2.61 crore whereas its branches outside Kerala average for around Rs 8.5 crore. Due to the low business in the state, the lender was anyway going to shut some of its branches, George Alexander, managing director, said on Monday.
Earlier, the company used to issue non-convertible debentures (NCD), which needed to be maintained in person, but now because of demat accounts there is no need of having in person deal with the bond holders.
Alexander in Monday’s conference call explained that the members of trade union were threatening employees in the branches and not letting them work. Muthoot Finance has closed over 200 branches in Kerala in last three years. However, outside Kerala, the company said it has opened 465 branches. At present, the lender is able to function with only over 300 branches due to the current impasse.
FE has learned that the employees sought the help of CITU as they were not happy with the wage hikes and steep targets set by the company. George, in the conference call on Monday, argued that Muthoot was paying better than industry standards.