Muthoot Finance Ltd. is unlikely to go overboard with loan-to-value ratios despite the Reserve Bank of India raising it to 85% from 75% for loans up to Rs 2.5 lakh, Managing Director George Alexander Muthoot said.
The lender has always been conservative and does not think it’s the time to go overboard. George sees Muthoot Finance will maintain its net interest margin at 10–11%.
LTV calculates the percentage of a property’s value which the loan covers. It’s used to assess the risk of the loan and determines eligibility of the borrower.
Now as the gold prices are going up, the actual LTV is coming down. Taking into account the total gold Muthoot Finance has, and the money it has lent to customers, the actual LTV is 58%, George said.
The RBI raised on Friday the loan-to-value ratio for lending against gold to small borrowers with ticket-size of up to Rs 2.5 lakh to 85% from 75% earlier.
Muthoot Finance will likely start their systems to make the new gold norms effective from April 1, 2026. George clarified that most of the rules and regulations mentioned in the new gold loans are more or less in effect, other than LTV update. The regulator has brought all the existing norms under the comprehensive single regulation.
Credit appraisal would be required for loans up to Rs 2.5 lakh and it will likely be lighter because loans are fully collateralized, George said in an interview to NDTV Profit.
More than 80% of the loan in Muthoot Finance’s book is below 2.5 lakh, he said.
Muthoot Finance sees only a 50-basis-point increase in loan growth of non-banking financial services because of the RBI’s repo rate and CRR cut, George said. The loan growth for small tickets will not be significant. The repo rate and CRR cuts will increase the availability of funds from the banks.
Banks will start reducing loan rates for non-banking financial companies in the next one or two quarters. Slowly, the lending rate will come down. When the cost of funds comes down, Muthoot Finance passes it down to customers, George said.
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