Muthoot Finance to offer National Pension Scheme

http://www.thehindubusinessline.com/industry-and-economy/banking/muthoot-finance-to-offer-national-pension-scheme/article4097737.ece

The gold loan company Muthoot Finance Ltd has entered into a tie-up with the Pension Fund Regulatory and Development Authority (PFRDA) to offer the National Pension Scheme (NPS).

With this, Muthoot Finance becomes the only NBFC in Kerala to be approved by the PFRDA to act as a service provider for the pension plan.

The scheme is available to all citizens on voluntary basis and would include workers in the unorganised sector. The aim of the National Pension Scheme (NPS) is to promote old age income security.

George Alexander Muthoot, Managing Director Muthoot Finance said, “With our pan-India network of close to 4,000 branches in both urban as well rural areas, we will ensure that the benefit of this pension scheme reaches the maximum number of Indians.”

The salient features of the scheme are that it is open to all citizens between the ages of 18–60 years. The minimum subscription is Rs 500 per month with an option for investors to choose any growth scheme (active and auto choice).

The scheme assures regular monthly pension on attaining the age of 60 and tax benefit of up to 10 per cent of the individual’s salary (basic + DA) under Section 80CCD (2) over and above the current limit of Rs 1 lakh. The scheme also allows lumpsum repayment of funds of up to 60 per cent of the balance outstanding in the account on attaining the age of 60.

Banks can't lend to jewellers for purchase of gold: RBI

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/banks-cant-lend-to-jewellers-for-purchase-of-gold-rbi/articleshow/17027968.cms

After putting curbs on non-banking finance companies (NBFCs) lending against gold, the Reserve Bank of India on Tuesday banned banks from lending for purchase of gold by jewellers. 

"No advances should be granted by banks against gold bullion to dealers or traders in gold if, in their assessment, such advances are likely to be utilised for purposes of financing gold purchase at auctions or speculative holding of stocks and bullion," the RBI said in its half-year review of the monetary policy. The RBI has been concerned over banks' exposure to gold finance companies and has taken steps to curb it. 

Earlier this year, the central bank asked banks to reduce their exposure to NBFCs giving loans against gold, as it was concerned by the significant rise in gold imports in recent years. The RBI set up a working group to suggest ways to deal with the rising imports of gold. 

The central bank said that direct bank financing for purchase of gold in any form - bullion or primary gold, jewellery, gold coin - could lead to fuelling of demand for gold for speculative purposes. 

RBI governor D Subbarao said this step is more of a reiteration of an old policy and banks should not finance gold purchases unless it is a working capital need for a jeweller. 

In March, the RBI has restricted NBFCs from lending against bullion.

RBI relaxes norms for opening subsidiaries by foreign NBFCs

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/rbi-relaxes-norms-for-opening-subsidiaries-by-foreign-nbfcs/articleshow/16757333.cms

Relaxing norms for foreign-owned NBFCs to open subsidiaries, the RBI today said such entities can now set up arms even if the overseas investment is less than 100 per cent.

"NBFCs having foreign investment more than 75 per cent and up to 100 per cent and with a minimum capitalisation of USD 50 million, can set up step down subsidiaries for specific NBFC activities," RBI said in a notification.

Earlier, only 100 per cent foreign owned non-banking financial companies (NBFCs) with minimum capitalisation of USD 50 million were allowed to set up subsidiaries.

The notification further said that the step down or operating subsidiaries could be set up without any restriction on their number and without bringing in additional capital.

The RBI notification follows government's decision last week in this regard.

Gold loan NBFCs will feel regulatory heat: ICRA

http://www.thehindubusinessline.com/industry-and-economy/banking/article3885914.ece

The growth and profitability of non-banking finance companies specialising in gold loans are expected to take a hit due to regulatory pressure.

The new regulations, in the form of loan-to-value (LTV) cap and funding constraints, will significantly restrict expansion capabilities of these NBFCs, said ICRA Management Consultancy Services (IMaCS).

By the new Reserve Bank of India norms, NBFCs can lend only up to 60 per cent of the value of pledged gold (the LTV ratio is capped at 60 per cent).

Further, for banks, the exposure to a single gold loan NBFC has been reduced to 7.5 per cent from 10 per cent of the banks’ capital funds.

The consulting firm said specialised NBFCs need to gear up to meet the anticipated rise in competitive pressure from banks that have, by regulations, been incentivised for a more direct presence in the gold loan segment.

According to IMaCS, the RBI provides regulatory arbitrage to banks, which have no LTV caps and low capital adequacy requirements vis-à-vis NBFCs operating in the segment. The consulting firm expects the yield on gold loan portfolio of the specialised NBFCs to come down by 80-120 basis points. This combined with pressure on funding costs is expected to translate into a reduction of 70-90 basis points in the return on assets (RoA) of gold loans NBFCs in FY13.

REGULATORY IMPACT

“The impact of the regulations is expected to range from moderate to high depending on the counterstrategies adopted by these NBFCs.

“The strategies will include an option of grossing up the collateral value for gold loans, by including the making, polishing and stones/gems charges in the collateral value which is estimated at around 15-20 per cent of the value of jewellery,” said the consulting arm of credit rating agency ICRA.

IMaCs expects the growth in gold loan portfolio of the NBFCs to settle at to 20-22 per cent.

Over the next couple of years, gold loan NBFCs are expected to focus on consolidating their current market position, possibly slow down their expansion drive (yet maintain their first mover advantage in non-South regions), said IMaCS.

These companies are expected to invest in strengthening their credit, operational and governance systems to meet the regulatory requirements.

The organised gold loans sector had grown to Rs 1,15,000-1,25,000 crore in FY12 from Rs 68,000-72,000 crore in FY11.

Muthoot Finance to raise Rs 500 crore debt, goes slow on lending

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/muthoot-finance-to-raise-rs-500-crore-debt-goes-slow-on-lending/articleshow/16355103.cms

The country's largest gold loan player Muthoot Finance, which is aiming to raise up to Rs 500 crore debt, today said it has gone slow on asset acquisition this year as a result of regulatory concerns over the lending-against-gold model.

"This is a year of consolidation for us. Our assets under management have de-grown by 6 per cent and stand at Rs 23,300 crore now from the March figure of Rs 24,400 crore," managing director George Alexander Muthoot told PTI here.

He, however, said the company expects to cover up the lost ground in the remaining period of the fiscal, and close with a 10 per cent growth for the entire fiscal once regulatory clarity comes in.

Muthoot refuted suggestions of systemic risk to the sector.

The company has also gone slow on its network expansion and will be opening only 200 branches this fiscal as against the 900 each it had opened in the past two fiscals.

However, he said, in spite of the consolidation its margins continue to be unaffected and the company will end the year with the net interest margin at the 9-9.5 per cent levels.

Muthoot Finance today announced the launch of Rs 250 crore non-convertible debenture issue, with a green shoe option to retain over-subscriptions of an equal amount.

The issue, which is open between September 17 and October 5, offers an effective yield of up to 12.40 per cent.

Investors will be having five options to choose from and minimum subscriptions will have to be for 10 debentures having the face value of Rs 1,000 each.

The funds raised will be used for lending and investments, to repay existing liabilities or loans, and towards business operations including capital expenditure, working capital requirement and other general corporate purposes, the company said.

Muthoot Finance to recruit 2,000 people this year

http://www.thehindubusinessline.com/industry-and-economy/banking/article3733289.ece

Muthoot Finance will recruit about 2,000 people this year, Managing Director George Alexander Muthoot told Business Line today.

The current year marks the beginning of a “consolidation phase”, when the company will slow down branch expansion. It will open not more than 250 new branches this year compared with 1,000 in each of the last two years.

He said the company prefers to recruit graduates from the same area.

Muthoot Finance is a non-banking finance company that specialises in giving loans against pledged gold. Today, it manages gold loan assets of Rs 23,000 crore.

George Muthoot said that the company expects to end the year with a turnover of around Rs 26,000 crore.

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Muthoot Finance net rises 29% at Rs 246 cr

http://www.thehindubusinessline.com/industry-and-economy/banking/article3703847.ece

Muthoot Finance on Monday reported 29 per cent growth in net profit at Rs 246 crore during the first quarter ended June 30.

Total income grew by 41 per cent at Rs 1,294 crore, retail loan assets under management decreased by Rs 1,337 crore to Rs 23,336 crore, a decline of five per cent.

The RBI restrictions in March this year with regard to the maximum loan that could be given against the value of the gold jewellery pledged did create concern, he said.