Muthoot Finance expects to see 15% gold loan growth or more in FY22
MUMBAI: Muthoot Finance, a Kerala-based gold lending company, saw a sharp improvement in the quality of its assets in the fourth quarter of FY21 and expects a change of direction in business from the second quarter of FY22, and also expects growth of FY22 15% on gold credits.
In an interview with the Mint, Muthoot Finance Managing Director George Alexander Muthoot shared its outlook for the Gold Loan sector and explained why the company is reducing its presence in Kerala.
Did your bank face any gold auctions in FY21 when compared to Non-Banking Financial Companies (NBFC)?
Our practise is different from other companies. This year we only made $ 171 billion in gold auctions or 0.03% of the auctions. Last year it was 500 crore and the year before it was 1,000 crore. The term of our loan is 12 months. Others follow a three-month term. If the customer is unable to pay interest, the only option left is to classify him (the loan) as overdue assets (NPA). With us, the loans only become an NPA after 16 months, more time to pay. There is no EMI (equivalent monthly fee). We didn’t lose any money as a result.
Are More People in a Rush to Get Gold Loans?
I am sure we will see growth like last time. as soon as the business opens. They are our main customers. As soon as the business starts up again, they will need credit. At this point, like last year, we will see good growth. The first quarter of last year was also a failure. Business recovered in the second and third quarters.
How do you estimate the growth in gold loans in fiscal year 22?
We spoke of a growth of 15% and we will make the same forecast this year as well. We say 15%, but if it looks good we can always get over it.
How are you going to compete with banks that are getting aggressive in this area?
The gold credit market expanded in the second and third quarters. Our business has not started. You have been able to acquire new businesses or new customers who have not previously taken out gold loans. These customers may prefer to borrow from a bank rather than an NBFC.
Banks use this opportunity with aggressive advertising. Some customers have probably left. We have added 300,000 customers. Gold is out there. There is no need to compete with the banks.
How Much Does Kerala Bring to Your Business?
Kerala contributes 2% of the business. We have deliberately cut back on business in Kerala. Banks do business here. You get a new customer base. We haven’t lost any business in Kerala. In fact, despite the branches closed, we have won business.
Why did you decide to cut back on business in Kerala?
The communist government has created some labour problems in the branches of Kerala. We have closed 120 branches. The branch business in Kerala is very low. The store in Kerala is ₹ 2.5 crore. Outside of Kerala, it is 12.5 crore. Productivity is low here, and business is also low.
How do you see the growth of non-gold loans?
It hasn’t been the best year for us in the non-gold lending business. We narrowed our focus. Prior to last year, it was 12% more non-gold loans. In 2021, the growth was 10% other loans and 90% of gold loans. Lending business to be cut back Now it is in decline.
Which segments are growing?
Microfinance is growing in Tamil Nadu and other areas. We rejected vehicle financing and affordable home loans. Last year, credit was limited. We expect an upturn from the second quarter (fiscal year 22).