Shares in gold finance companies such as Muthoot and Manappuram Finance fell sharply on Tuesday on new gold loan guidelines by the Reserve Bank of India on Monday.
Muthoot Finance shares plunged 10 per cent to a low of Rs 101.75, while Manappuram Finance shares were down 5 per cent at Rs 15.50 on the Bombay Stock Exchange.
The selloff in Muthoot and Manappuram Finance shares came after the central bank announced final guidelines to check the risks associated with the rapid growth of non-banking financial companies (NBFCs) that are engaged in lending against gold jewellery.
Making charges on jewellery will no more will be allowed to be added for loan-to-value (LTV) calculations, the central bank said. Besides, loans above Rs.1 lakh will have to be disbursed by cheque, the RBI stipulated.
Manappuram and Muthoot, which have over 1,000 branches, will need RBI nod for further expansion.
Moreover, borrowers who pledge over 20 grams of jewellery, will have to produce a record of verification of ownership of jewellery.