Muthoot Finance expects gold loan portfolio to grow 15-20% in 2020-21: Managing Director

NEW DELHI: Muthoot Finance expects its gold loan business to grow 15-20 per cent during the current financial year, and hopes the gold portfolio to remain largely unaffected by the coronavirus pandemic, its Managing Director George Alexander Muthoot said.
As gold prices are currently ruling high, the collateral is becoming more valuable, he said adding that now, people can borrow more money out of the same holding and as a lot of publicity is going around gold and gold prices, more and more people are inclined to take gold loan.

Muthoot Finance witnessed a 22 per cent growth in its gold loan portfolio in the last financial year ended March 2020.

"The number of people who would like to avail gold loan is also going up. All the publicity around gold loan is also helping drive the gold loan demand. In the last two years, we have been growing between 15 per cent and 20 per cent (gold loan portfolio). "

"Last year, we grew by 22 per cent in (terms of) gold loan (asset under management). This year also, we have given a guidance that we will grow our gold loan business AUM by 15-20 per cent in 2020-21," Muthoot told in an interview.

He said the company expects the demand to surge in the next two-three quarters.

Currently, the company's gold loan AUM stands at Rs 46,000 crore.

Around 90 per cent of the company's business comes from the gold loan portfolio, while the rest of the 10 per cent from microfinance, vehicle finance and affordable housing finance put together, he added.

Muthoot said that mostly, traders, shopkeepers and small businesses avail gold loans for meeting their working capital needs.

"Gold loan is a short-term loan; it is an ideal working capital loan. Small businesses want to re-start their operations, that's why they are coming to us for gold loans," said Muthoot.

He also said the company has launched products like Loan@Home and Gold UNLOCKER as part of its digital offerings, amid the coronavirus pandemic.

Under the Loan@Home, a company executive will visit the customer's house and do the due diligence for loan.

On Gold UNLOCKER, Muthoot said India has as much as 25,000 tonnes of gold while only about 2,000 tonnes of the yellow metal is there in the organised lending space.

"The balance of 85-90 per cent is still in locker or home. So, we call it gold UNLOCKER. We are urging our customers to keep their gold in our locker. We will assess it, value it, keep it in our locker, get it duly insured and on that, they can avail gold loan," Muthoot said.

He also said that being a South India-based non-banking financial company, Muthoot Finance's majority of the branches in the country's southern region. Muthoot added that the company will expand the gold loan business to northern, eastern and western regions also where the branches are predominantly in bigger cities at present.

He said the company plans to open as many as 200 branches during the current financial year and, thus, would also need to hire more people for this.

On the digital front, Muthoot Finance said it has recorded strong traction on its iMuthoot mobile app as well as the online portal in the months following the COVID-19 pandemic.

It has seen a fourfold jump in quantum of loan disbursals through its digital platforms to Rs 224 crore in June as compared to February.

As on March 31 this year, the company had 176 tonnes of gold jewellery kept as security and the loan's assets under management stood at Rs 41,610.60 crore.