Indian two thousand and five hundred rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Manappuram Finance Expects Cost Of Funds To Fall By 50 Basis Points

The Reserve Bank of India’s move to peg interest rates to an external benchmark is expected to lower borrowing costs of non-banking lenders by 50-60 basis points, according to VP Nandakumar.

“Due to the RBI’s regulatory harmonisation, loan companies will get the benefit which was earlier enjoyed by only asset finance companies,” the managing director and chief executive officer of Manappuram Finance Ltd. told BloombergQuint. “The move will benefit our company as it has an AA-rating and our risk weight to lenders will come down to 30 percent.”

Starting April 1, floating-rate personal or retail loans and small business loans will be linked to an external benchmark, according to a change announced along with the monetary policy.

The central bank lowering the repo rate by 25 basis points in February will also translate into lower cost of funds, Nandakumar said. Manappuram Finance expects its gold business to grow by 10-12 percent this fiscal—lower than its earlier forecast of 15 percent—dragged by its December quarter results.

Watch the full interview here:

Also read: RBI Asks Banks To Peg Floating-Rate Loans To External Benchmarks