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Lenders auction more gold as Reserve Bank steps up scrutiny
Hindustan Times
|December 23, 2024
Companies lending against gold are auctioning the collateral in higher quantities to recover stressed loans, at a time of rising regulatory scrutiny over the sector.
Gold auctions that rose sequentially in the second quarter are expected to rise further in the ongoing December quarter, experts said, since directions from the Reserve Bank of India (RBI) pertaining to gold loans came only at the end of the second quarter.
Cumulative data on gold auctions is not available; however, leading gold loan financier Muthoot Finance Ltd said at an analyst call that it auctioned gold worth 69 crore in the first quarter, followed by ₹250 crore in the second quarter.
Another gold-focused nonbank lender, Manappuram Finance, said in its analyst call that it auctioned gold worth ₹360 crore in the second quarter. The company said it has an average book loan-to-value (LTV) ratio of 58%, against the regulatory maximum of 75%.
LTV of 75% means a gold loan of ₹75 should be backed by gold collateral worth ₹100.
This story is from the December 23, 2024 edition of Hindustan Times.
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