Muthoot, Manappuram Shares Fall As RBI Curbs Cash Loans

Shares of gold lenders Muthoot Finance Ltd. and Manappuram Finance Ltd fell after the Reserve Bank of India (RBI) lowered the cap on loans advanced in cash.

The central bank cut the limit to Rs 20,000, one-fifth of the earlier cap, an RBI notification said.

Muthoot ended 4 percent lower and Manappuram declined 4.5 percent.

The Indian central bank has brought the lending norms in line with income tax rules as the government pushes to curb cash transactions.

The lower cap curbs the ability of non-banking finance companies to accept loan repayment in cash and will hurt collections, said Nischint Chawathe, analyst at Kotak Securities, in a note to clients. A large chunk of gold loan and microfinance firms’ business is in cash, he said.

Like demonetisation turned out to be a buying opportunity, any correction due to RBI’s regulatory change could turn out to be a buying opportunity, especially in gold finance companies, said Digant Haria, analyst at brokerage Antique Institutional Equities.