Share price of Muthoot Finance and Manappuram Finance gained in afternoon trade today after Reserve Bank of India (RBI) announced a relaxation on loan-to-value (LTV) ratio for gold loans from the current 75 per cent to 90 per cent. The move by RBI to raise LTV ratio on gold is likely to add to the business of gold these gold financing NBFCs since more consumers will choose gold loans as a route to raise funds.
Share price of Muthoot Finance gained up to 5.36% to Rs 1324 after RBI's announcement. On Wednesday, the stock closed at Rs 1,257 on BSE. However, after hitting intra day high, the share some profitbooking and fell 3.42% to Rs 1214 on BSE.
The share has gained 93% in one year and 59% since the beginning of this year.
Total 3.81 lakh shares changed hands amounting to turnover of Rs 47.97 crore.
Similarly, share price of Muthoot Finance rose 6.12% to Rs 169 after the RBI announced change in LTV ratio of gold. Later, the stock saw profit booking and was trading 0.60% lower compared to the earlier close of Rs 159.25.
The stock has lost 10.54% in one year and gained 35.53% since the beginning of this year. Total 15.03 lakh shares changed hands amounting to turnover of Rs 24.53 crore.In one year, the large cap stock has gained 79.87% and risen 50.46% since the beginning of this year. Market cap of the firm rose to Rs 45,970 crore.
Relaxing the LTV ratio from 75% to 90% on gold loans means that if the value of your gold is Rs 1 lakh you can now get a loan of up to a maximum of Rs 90,000 from the earlier Rs 75,000.
Announcing the decision taken by RBI's Monetary Policy Committee (MPC), central bank governor Shaktikanta Das said loans against gold have been enhanced to mitigate the impact of COVID-19 on households. He enunciated that "with a view to mitigating the impact of COVID-19 on households, it has been decided to increase the permissible loan to value ratio (LTV) for such loans to 90 per cent." He added that this relaxation shall be available until March 31, 2021.
The LTV ratio refers to the amount of a loan a borrower can get against gold as collateral.
by Aseem Thapliyal