Muthoot Finance Ltd, the largest non-bank finance company (NBFC) in gold lending, which halted expansion of non-gold businesses – home, auto and personal lending – after the Covid-19 outbreak to focus on the all-weather gold lending business, is now considering revisiting these verticals.
Expecting a rebound in the economy in 2022, Muthoot is looking to revamp its home and vehicle finance business. The NBFC will increase lending in the space, particularly to meet existing gold lending customers, said George Alexander Muthoot, managing director of Muthoot Finance Ltd (MFL).
MFL’s gold loan under management rose to 5.47 lakh crore in September 2021 from 4.08 lakh crore in March 2020. However, the portfolio of other loans decreased to 4,647 crore from ₹ 8,382 crore during of this period.
The company’s home loan segment was hit when builders in the affordable category failed to deliver projects on time, especially after the pandemic.
“Auto financing is not a good industry today. But it will probably resume next year. So we started lending again, ”Muthoot said.
“Over the past two years, especially after the outbreak of the pandemic, we have halted issuance of other loans. Clients continued to repay loans during this period and this resulted in the other loans under management being reduced by half, ”he added.
MFL offers auto, real estate and personal loans to its existing clients. For a 360-degree connection, the company offered the other loans to its customers, explains the general manager. It was also to prevent banks from poaching gold lending customers.
“If the economy is doing well, there will be a demand for funds. Our gold lending clients are generally small entrepreneurs, traders, small traders, among others. When economic activity picks up, they will need capital to store goods, ”Muthoot said.
MFL has 4,600 branches across India. Half are found in the northern and northeastern states. The lender started the gold lending business in Kerala and expanded massively around 15 years ago. About 25 years ago 95% of its business came from Kerala. After their pan-Indian expansion, Kerala’s activity fell to just 2.5%, while the other states contributed 97%.
“We have over 200 branches in Delhi-RCN and 300 in Punjab. Uttar Pradesh and the northeastern states are also contributing substantially to the activity, ”Muthoot said.
The NBFC is not very keen on increasing the number of branches, but has focused on improving the activity of each branch. “About six years ago, the average turnover for each branch was around 5 crore. It has increased to over 11 crore now, ”he said.
MFL will revamp the worst performing branches and open new branches wherever it is possible to scale, he added.
MFL has a client base of over 1 lakh and 178 tons of gold jewelry are used as collateral for the loans.