Non-banking financial companies offer Covid-19 insurance covers to its gold loan customers

KOLKATA: Non-banking financial companies (NBFCs) offering gold loans have come up with new schemes after the Reserve Bank of India permitted banks to offer loans up to 90% of the value of the gold pledged by customers instead of 75% earlier.

Several NBFCs are also offering Covid-19 insurance covers to their gold loan customers so that they do not lose business to banks. NBFCs operate on 75% loan to value (LTV).

For instance, Muthoot Finance has tied up with Kotak Mahindra General Insurance Company to provide complimentary Covid-19 insurance cover to its gold loan customeFor instance, Muthoot Finance has tied up with Kotak Mahindra General Insurance Company to provide complimentary Covid-19 insurance cover to its gold loan customers. The non-banking lender is offering a higher per gram lending rate for gold loan, along with complimentary Covid-19 cover up to Rs 1 lakh, to its Muthoot Super Loan scheme customers.

The non-banking lender is offering a higher per gram lending rate for gold loan, along with complimentary Covid-19 cover up to Rs 1 lakh, to its Muthoot Super Loan scheme customers.

“Currently, our average loan to value (LTV) stands at 54%. We believe there is enough space for us to grow with the current permissible LTV level of 75%. Given our risk matrix we are comfortable with the said LTV,” said George Alexander Muthoot, managing director, Muthoot Finance.

The company expects 15% growth in assets under management this financial year, said Muthoot. “As gold loans are short-term loans, people need money to restart their business and avail immediate working capital. We expect in the next three-four months economic activities will pick up. With prices of gold having gone up, a lot of people have started to consider gold loans a very good option to avail quick money for their business needs. With banks entering the gold loan sector, the potential of the market is increasing and expanding further.”

Manappuram Finance said that introducing new schemes, or improving existing products and services, is an ongoing affair. The company recently expanded doorstep gold loan facilities across the country, with instance remittance of the gold loan to the customer’s bank account.

“Gold loan NBFCs cater to a different class of customers than the banks and there is little overlap,” said VP Nandakumar, managing director, Manappuram Finance. “Therefore, we don’t envisage loss of customers to the banks on this account. Access to a nearby branch, and the convenience of a loan available in a matter of minutes, matter a lot to the class of customers we cater to.”

Muthoot Fincorp has come out with new variants of gold loan schemes in the past three months to cater to different segments of customers. Ashwas Dinam gold loan for nano and micro enterprises, Student Support EMI Gold Loan for purchase of laptops facilitating online education of children and Restart India Pradhan Gold Loan for supporting micro, small and medium enterprises are the prominent ones among them.

“It would be a very short-term thinking to permit banks to lend up to 90% LTV since it requires a close watch on price movements,” said John Muthoot, chairman of Muthoot Fincorp.