Why Gold Loan Companies Like Manappuram, Muthoot Finance Shares Are Falling?

Gold financers' stocks fell as much as 10 per cent in trading on Wednesday, April 9, 2025, following Reserve Bank of India (RBI) governor Sanjay Malhotra's announcement to review regulations on gold loans.

“In order to harmonize guidelines across various types of regulated entities to the extent possible, keeping in view their differential risk-bearing capabilities, we shall issue comprehensive regulations on prudential norms as well as conduct-related aspects for such loans,” RBi governor said. 

Gold Market Take a Hit
 

The RBI governor, in his monetary policy statement, stated that the central bank would conduct a detailed review of regulations for gold loans.

At about 11:14 AM, Muthoot Finance stock price was lower by 10.15 per cent while Manappuram Finance shares were lower by 2.8 per cent.  Compared to this, the NSE Nifty was lower by 0.66 per cent at 22,387.95.

In March, according to reports, India's central bank had intended to request lenders to adhere to tighter underwriting procedures for gold loans and track the end-use of funds as it attempts to dampen growth in the high-flying segment.

Also Read: Indian Markets Crash: Will Gold Continue To Fall? 3 Experts Weigh-In

Key Declaration of the Governor

RBI's governor stated that to harmonize regulations across different categories of regulated entities to the extent feasible, considering their differing risk-bearing capabilities, they will introduce comprehensive regulations on prudential standards as well as conduct-related matters for such loans.

“Third, loans secured against the pledge of gold jewellery and ornaments, popularly referred to as gold loans, are given by regulated players — banks as well as NBFCs — for both consumption and income generation purposes" Malhotra said. 

RBI Regulation: Reasons 

Gold jewelry loans are extensively utilized in India for both consumption and income purposes. Nevertheless, rules covering such loans vary between different regulated institutions such as banks and NBFCs.

The RBI will shortly come out with a detailed draft of new guidelines for public comments to make gold loan norms more transparent and tighter.

The prime objective is to come out with one set of guidelines that would apply to banks and NBFCs alike or gold-backed loans. This would make fair and uniform practice for all lenders.

The RBI action also takes into account the varying capacities of risk that banks and NBFCs can absorb. While doing so, it also seeks to provide greater protection to borrowers availing of gold loans.