With gold loans no longer eligible for priority sector credit tag, customers have been impacted more than non-banking finance institutions (NBFCs), said a top official from Muthoot Finance.

“Customers were earlier availing themselves of loans at 12 per cent under the low-interest scheme. Now our exposure to that segment has reduced,” Mr George A. Muthoot, Managing Director, Muthoot Finance, told Business Line . The average rate of interest currently is 22 per cent.

“We had an exposure of Rs 3,500 crore in the low-interest rate scheme as on March 31, 2011, which has now come down to Rs 1,000 crore,” he said. The company had to reduce its exposure in that segment, because availability of cheaper funds was less, he added.

But the RBI has recently appointed a committee to study whether banks should be permitted to buy out from NBFCs, based on which there could be a re-think on the earlier directive, he said. The committee will be headed by Mr M.V. Nair, Chairman, Indian Banks' Association.

On credit growth, Mr Muthoot said that the company, which had seen over 100 per cent growth in business last fiscal, would now be looking at 55-60 per cent growth, “mainly because the base has gone up”. From a loan base of Rs 7,400 crore in 2009-10, the company grew to Rs 15,600 crore last fiscal. Currently, its loan book stands at over Rs 20,000 crore.

The focus would be to spread out in the rural, semi-urban and outlying areas of cities, “where there are lots of opportunities,” he said. The company recorded 20 per cent increase in new customer acquisition, mostly from these areas.

The company, which raised Rs 900 crore through its IPO in April this year, raised Rs 700 crore through non-convertible debentures recently. Mr Muthoot pointed out that the NBFC's capital adequacy stood at 19 per cent, which was sufficient to meet the credit requirements for the next one or two years.

Related Topics