Board may consider applying for banking license after RBI guidelines are out: George Alexander Muthoot

George Alexander Muthoot, Managing Director, Muthoot Finance, talks about rejection of the proposal to acquire IDBI Mutual Fund, RBI’s working committee recommendations and gold loan demand among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: The RBI has turned down the Muthoot Finance proposal to acquire IDBI Bank's mutual fund business. What would you like to say about it?

A: The RBI has made a slight change in its policy. In its reply that we have received, it has written that it is not quite comfortable in allowing NBFCs to invest in Mutual Funds or running mutual funds. This is why they have rejected the proposal. We do not see anything more in it, if the regulator is not comfortable then we will not be able to do it.

Q: Working Committee recommendations have provided a way forward for NBFCs. What is your view on it and what kind of opportunities do you see there for your company? Also, tell us about your outlook on Gold financing in light of RBI announcements?

A: First of all, I would talk about the guidelines that have been issued. The guidelines recommended by the RBI has introduced amendments in 2-3 things, like

Promoter holding: The cap on the promoters stake can go up from existing 15 per cent to 26 per cent.
It says that the well-run large NBFCs with an asset size of Rs 50,000 crore and above may convert into full-fledged banks.

These are recommendations and it is seeking response of the stakeholders on it and then it will be announced. Suppose the announcement has been made but our board has not had any discussion on it that should we apply for a banking license or not. So, our board of directors will discuss the issue after a final notification is out. However, there is nothing big in the amendments that have been recommended and we are not quite worried and thinking about jumping for a banking license.

Q: The gold price has been fluctuating. So, what kind of demand you are seeing on your digital platforms and what is your outlook on the gold price and demand for the remaining quarters and next financial year?

A: It is such that there is always a festival in India, like Onam, Diwali, Dusshera, Christmas or something else, and there is a demand in this period of any festival. So, some of the festivals have passed and few are coming. We have seen, after the lockdown, when the customers had to restart/ reopen their businesses and they needed money for the same, then the gold loan is the easiest solution to get money. Because other options, like personal loan, housing loan, and vehicle loan among others have turned a bit difficult, nowadays, as compared to what it was some six months earlier. So, people are depending more on gold loan and this was an opportunity for us that’s why we saw a good increase in the last quarter.

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