Muthoot Finance, Manappuram shares tumble up to 8% on RBI’s cash disbursal advisory

Shares of Muthoot Finance and Manappuram Finance plummeted up to 8% on May 9, a day after the Reserve Bank of India (RBI) reportedly sent them an advisory letter limiting cash disbursal of loans.

The central bank has reportedly asked both non-banking financial companies (NBFCs) to strictly adhere to the Income Tax Act (IT) provision on cash disbursement, stating that no NBFC should disburse loan amounts in excess of Rs 20,000 in cash.

Advertisement

The advisory was sent by the banking regulator after certain large gold loan-providing NBFCs had reached out to the RBI for clarity on cash disbursals. It was sent by the RBI’s Department of Supervision specifically to gold loan financiers like Muthoot Finance and Manappuram Finance, reported CNBC-TV18.

The advisory is being viewed as a warning to gold-loan NBFCs to abide by the rules, reported CNBC-TV18. Earlier this year in March, the RBI barred IIFL Finance from disbursing gold loans for violation of cash disbursal norms, among other issues.

Ambit Capital, in a report, said that this development is of concern because NBFCs focusing on small-ticket loans in rural areas (microfinance institutions, gold loans mostly) are likely to have a higher proportion of disbursals in cash. “Hence, this rule may impact their operations/AUM growth for a brief period,” it said.

Gold loan NBFCs, especially Muthoot Finance, may see some impact, according to Ambit analysts. However, they expect the impact on Muthoot to be offset by tailwinds from higher gold prices and market share gains from the IIFL gold loan ban.

At 10:20 am, Muthoot Finance shares were trading 4.8% down at Rs 1,581.15 apiece on the National Stock Exchange (NSE), while Manappuram Finance shares were trading 5.6% lower at Rs 169.80.