Muthoot Finance, Manappuram Finance Plunge On RBI Warnings
RBI instructs both NBFCs to rigorously abide by the Income Tax Act's (IT) cash distribution provisions
The stocks of Manappuram Finance and Muthoot Finance plunged 2 to 6 per cent in the Thursday trading session after the Reserve Bank of India (RBI) sent an advisory regarding limitations of cash disbursement on loans to NBFCs.
Manappuram Finance traded 6 per cent down, while Muthoot Finance traded 1.6 per cent lower in the afternoon session on the National Stock Exchange (NSE).
According to reports, the central bank has instructed both NBFCs to rigorously abide by the Income Tax Act's (IT) cash distribution provisions and has stated that no NBFC should disburse loan amounts above Rs 20,000 in cash.
The central bank issued the warning after some sizable NBFCs that offered gold loans contacted the RBI to inquire about cash disbursals. It was sent especially to financiers of gold loans including Muthoot Finance and Manappuram Finance, by the Department of Supervision of the Reserve Bank of India.
The instruction is seen as a warning to gold-loan NBFCs to follow the guidelines. Notably, the RBI prohibited IIFL Finance from disbursing gold loans earlier this year in March due to non-compliance with cash disbursal guidelines among other issues.
Morgan Stanley reports that approximately 40 per cent of Muthoot's gold loans are transacted online, compared to 56 per cent of Manappuram's disbursements, which take place in person.
The global brokerage anticipated that both Manappuram and Muthoot Finance would face unfavorable sentiment in the near future. It also reiterated that Manappuram stock will perform better than Muthoot stock because of its less reliance on gold loans.
