Muthoot Finance Jumps as Gold Lending Rules Eased: Mumbai Mover

Muthoot Finance Ltd., the biggest lender in India that uses gold jewelry as collateral, surged the most in more than four months in Mumbai stock trading after the central bank eased lending rules.

Muthoot shares jumped 20 percent, the largest intraday climb since Aug. 29, to 128.9 rupees as of 10:17 a.m. local time. Manappuram Finance Ltd. gained 20 percent to 18.15 rupees. The benchmark BSE Sensex Index lost 0.1 percent.

The Reserve Bank of India raised the loan to value ratio for gold loans by 15 percentage points to 75 percent yesterday. The ratio represents the percentage value of the metal held as collateral that a firm may lend to customers. The previous ratio of 60 percent had been in place since March 2012.

“Gold loan companies will be back on a growth track,” V.P. Nandakumar, Manappuram’s chief executive officer and managing director, said in a telephone interview. “A higher cap on loans that can be given against gold means that the loan book will grow at a faster pace. The easing of rules show that the regulator is comfortable with gold loan companies.”

The company expects lending growth of 20 percent in the 12 months to March 2015, Nandakumar said.

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