Muthoot Finance loan-to-value currently at 61%

NBFC Muthoot Finance said its loan-to-value is currently placed at 61%, against the regulatory requirement of 75% and long-term average of 69-70%.

Managing director George Alexander Muthoot told FE that customers are not taking more amount per unit of gold. “We can lend up to 75% of the value of gold, but people take loans only according to their needs. LTV of some of our new loans is in the range of 50% because of higher gold prices. People take only what they want and come for a top-up if they need more,” he said and added gold in custody has come down in the current quarter.

Total weight of gold pledged with the company stood at 163 tonne at the end of the second quarter, against 171 tonne in the corresponding period of last fiscal.

The Kerala-based NBFC is confident of exceeding its guidance of 15% growth for the current fiscal year with demand for gold loan seen good.

Muthoot disbursed fresh loans to 4.40 lakh new customers amounting to Rs 3,653 crore and to 4.67 lakh inactive customers amounting to Rs 3,460 crore.

“Our assets growth has been Rs 5,600 crore in the second quarter and it has made up for the lost business in the first quarter. Our gold loan portfolio grew 14% sequentially to Rs 46,678 crore, while the non-gold portfolio remained flat ,” he said.

The company, which also operates home loan, microfinance and insurance broking subsidiaries, said the gold loan constitutes around 91% of the total business.

“Collections in non-gold loan portfolio have significantly improved month on month. Our collections in the home finance company is 84% and in the vehicle finance division it is 82%. In the microfinance, it is 86%. We have made COVID provisions in all the divisions,” he said.

George Muthoot said the average yield of the NBFC is 19% and likely to come down with the cost of funds coming down. “In the last three months, cost of our incremental borrowing has come down by 2%. But we still have legacy loans. We want to maintain our NIM at 9-10 %.”