Shares of Muthoot Finance, a non-banking financial company (NBFC) specialising in gold loans, fell for the second consecutive day on Friday, April 11, dropping 8.13% to a three-month low of ₹1,965 apiece.
The sharp decline came after the Reserve Bank of India (RBI) issued a new draft guideline for gold loans on April 9, aimed at standardising procedures across all lenders dealing in gold-backed financing.
The RBI’s draft norms mandate uniform documentation to protect borrowers and ensure consistency in the assessment of gold collateral. Lenders will now be required to follow a “standardized procedure” for evaluating the purity and weight—both gross and net—of the gold pledged.
These procedures must be implemented across all branches and made publicly available on the lenders’ websites to promote transparency. Importantly, the RBI has directed that borrowers must be present during the assaying of the gold at the time of loan sanctioning. Any deductions related to stone weight, fastenings, or impurities must be explained to the borrower and documented in a certificate.
The draft also stipulates that the loan agreement should detail the gold collateral, its assessed value, and the auction terms—including conditions under which the gold may be auctioned, notice period for repayment, and settlement details. To ensure clear communication, the RBI has asked lenders to use local or preferred languages of the borrower.
If the borrower is illiterate, the lender must explain key terms in the presence of a witness. Despite the immediate market reaction, some industry voices remain optimistic. Umesh Mohanan, CEO of Indel Money, told PTI that the RBI’s recent policy move could actually improve business sentiment and lead to higher gold loan demand, particularly as gold prices hover near all-time highs.
According to media reports, gold loans account for 98% of Muthoot Finance’s total Assets Under Management (AUM). In March, the gold loan financier announced that it had ₹1 lakh crore in Gold Loan AUM as of March 13, 2025″>crossed the landmark milestone of ₹1 lakh crore in Gold Loan AUM as of March 13, 2025.
Muthoot is one of the largest players in the gold loan market, focusing on loans against gold jewelry, although it remains relatively small within the overall financial sector in India.
Stock price trajectory
The stock, after taking a severe beating between August 2021 and June 2022, bounced back in the following months and continued the upward trend until March 2025, resulting in a massive gain of 145%. During the month, it also touched a fresh record high of ₹2,435.
Amid regulatory changes, the shares have corrected 16% so far this month — the biggest monthly drop since March 2020, when it crashed 30%.
MOSL doesn’t see long-term impact
However, analysts at Motilal Oswal Financial Services said the draft gold-lending guidelines are not disruptive and are only intended to harmonize the regulations for all the REs that offer gold loans.
“While there are a few operational changes that both banks and NBFCs will be required to implement, we do not see these guidelines as having any long- or medium-term impact on the loan growth or profitability of gold loan companies under our coverage (viz., Muthoot, Manappuram, and IIFL Finance),” it added.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
