- April 11, 2025
Muthoot Finance Slips 14% In 2 Days On RBI’s Draft Gold Loans Norms; Key Points For Investors – News18
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Shares of Muthoot Finance extended losses for the second consecutive session, falling as much as 8% to Rs 1,964.35 in intra-day trade on the BSE
Muthoot Finance shares plunge 14% in 2 sessions
Shares of Muthoot Finance extended losses for the second consecutive session, falling as much as 8% to Rs 1,964.35 on the BSE in Friday’s intraday trade, despite a broadly strong market. Over the last two trading days, the stock has tumbled nearly 14%, as investor sentiment soured following the Reserve Bank of India’s proposal to tighten gold loan norms, aiming to enhance transparency and risk management amid rapid growth in the segment.
At 9:29 AM, the stock was trading 6% lower at Rs 2,016, even as the BSE Sensex surged 1.5% to 74,952. The counter witnessed heavy volumes, with nearly 1 million shares changing hands across the NSE and BSE. Muthoot Finance had recently touched an all-time high of Rs 2,444.65 on March 20, 2025.
The RBI’s draft regulations, announced by Governor Sanjay Malhotra on April 9, propose a uniform Loan-to-Value (LTV) cap of 75% for all gold loans. Bullet repayment loans must adhere to this LTV at maturity, and any breach exceeding 30 days would require lenders to set aside an additional 1% provision. Renewals will not be permitted if LTV breaches persist at the loan’s maturity. Moreover, gold loans disbursed for income-generating purposes must be classified by actual end-use, with lenders required to document and monitor fund utilisation.
Analysts believe these measures, while aimed at standardisation, could curb the strong growth momentum of gold loan NBFCs. In a note, ICICI Securities said the harmonisation in regulations could trigger a correction in valuations across gold-loan-focused financials.
Despite the regulatory overhang, global rating agencies have recently turned positive on Muthoot Finance. S&P Global Ratings and Moody’s Ratings both upgraded the company’s long-term issuer ratings with a stable outlook. Moody’s cited Muthoot’s strong credit profile and leadership in the gold finance sector, while S&P noted its robust capital and earnings, along with resilience stemming from its highly collateralised gold loan book. S&P, however, flagged potential stress in its microfinance subsidiary but said it expects the overall asset quality to remain intact.
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