Gold Loan Stocks rally After RBI boosts‍ Loan-to-value Ratio

⁢ updated June 06, 2025

Shares ⁢of gold loan⁤ companies surged following the Reserve Bank of India’s (RBI) decision to increase the loan-to-value (LTV) ratio for gold‍ loans under ₹2.5 lakh. The revised LTV ratio now ⁤stands at 85%,⁣ up from the previous 75%, impacting gold loan stocks.

Muthoot Finance,Manappuram Finance,and IIFL⁣ Finance saw their stocks rally,with increases of up to 7%,5%,and 5% respectively. Muthoot ⁢Finance traded at ₹2,440, a rise from its day’s ⁣low ⁣of ₹2,284. Manappuram Finance reached ₹245,climbing from a low of ₹233,while IIFL ⁣Finance traded at ₹449,recovering from a low of ₹428. The increase in loan-to-value ratio has boosted⁣ investor confidence in gold loan stocks.

The ⁢RBI⁣ governor clarified that small-ticket gold loans will not ⁣require credit appraisal, and end-use monitoring will be limited to loans under the Priority ⁢Sector Lending (PSL) category. Thes measures aim to ‍streamline the lending⁣ process and reduce compliance burdens‍ for lenders, further impacting gold loan stocks.

There was nothing new in the draft norms on gold loans. We have consolidated all other norms… We will today ⁣or Monday morning release the⁣ final guidelines,” the Governor said.

The ⁢Ministry⁢ of finance had previously suggested revisions to the RBI’s draft directions on lending against gold collateral,including postponing the implementation. The Department of Financial Services (DFS) proposed exempting gold loans under ₹2 lakh ⁢from the proposed regulatory requirements to ensure timely disbursement for small borrowers. The RBI has also reduced the repo rate by 50 basis points to 5.50% and announced a ‍100 basis point CRR cut.

This marks the third consecutive ⁤rate cut by the RBI this year and⁢ under Governor Malhotra. Previous cuts of 25 basis ⁤points each occurred in February and april. The repo rate⁣ had remained at 6.5% for the 11 meetings prior to these adjustments. Despite rising gold prices, core inflation remained steady during March and⁤ April.

Core inflation ⁤remained largely steady⁣ and contained during March-April, ⁣despite increase in gold prices exerting upward pressure,” Governor said in his policy statement.

What’s next

The market will be watching for the final guidelines from the RBI,expected soon,to further understand the implications for gold loan companies and the broader financial sector.