Gold-Focused NBFCs Drop as RBI Signals Stricter Gold Loan Guidelines; Muthoot Finance Falls Nearly 6%

On Wednesday, April 9, 2025, shares of prominent gold loan firms such as Muthoot Finance Ltd, IIFL Finance Ltd, and Manappuram Finance Ltd experienced a significant drop. This decline came after RBI Governor Sanjay Malhotra announced that the central bank will soon release comprehensive guidelines on gold loans.

RBI's Intent for Stricter Supervision

The RBI has been closely monitoring lending against gold collateral for the past few years. The RBI has also issued supervisory recommendations and cautionary advice to lending institutions due to observed irregularities and compliance gaps in gold loan products. This announcement illustrates the RBI's intent to exercise stricter supervision over gold loan products. Therefore, depending on the form of the proposed guidelines, this move is likely to increase compliance costs and the burden on lending institutions primarily engaged in lending against gold.

Impact on Stock Prices

Gold loans constitute a significant portion of these companies' Assets Under Management (AUM). For Muthoot Finance, it stands at 98%, for Manappuram Finance at 50%, and for IIFL Finance at 21%. As a result of the announcement, the shares of Muthoot Finance saw a decline of 5.77% against the day’s opening at ₹2307.55. IIFL Finance’s shares also fell 2.50% to trade at ₹325.20, compared to the day’s opening at ₹ 328.90. Shares of Manappuram Finance also saw a fall of 1.77%.

Broader Monetary Policy Announcements

The announcement regarding gold loan guidelines coincided with a broader monetary easing by the RBI. The RBI lowered its key repo rate by 25 basis points to 6%. Additionally, the RBI trimmed its GDP growth forecast for FY26 to 6.5%, down from its earlier estimate of 6.7%. Despite the rate cut, banking stocks broadly declined, with public sector lenders leading the losses.

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