We are hopeful and optimistic that the measures taken by the Government in the upcoming budget - Muthoot Finance
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Pre-budget expectations by George Alexander Muthoot, MD at Muthoot Finance
"While we are cognizant of the challenges that the new covid variants are likely to pose, we are hopeful and optimistic that the measures taken by the Government in the upcoming budget will help give fillip to the nascent economic recovery in 2022. Gold Loan NBFCs tend to play a very integral role in supplementing the banking sector, and catering to the underbanked and underserved segment of the society. The reforms introduced by the Government and the RBI so far have majorly aided the revival of the economy and we believe that it will be important to continue offering this support/sops to the most impacted segments during the pandemic, which includes SMEs, MSME, self-employed, small traders, MFI sector along with supporting the housing segment. During the pandemic, gold loan NBFCs have played a crucial role in meeting credit requirements of the self-employed, MSMEs, women borrowers. Gold loan NBFCs do not get the benefit of priority sector lending (PSL) status, even when the loans are given to the priority sector borrowers. Gold loans are extensively used by farmers, micro-entrepreneurs and shopkeepers for seasonal requirements of working capital or other pressing requirements generally not catered to by the banking system. A large proportion of gold loans go to MSMEs for their short-term working capital requirements. Priority sector status will enable gold loan NBFCs to mobilise additional funds from Banks for on-lending to weaker sections.
We are also in tandem with the recent industry discussions with the honourable Finance Minister regarding setting up a dedicated refinance window for the NBFC sector and making banks’ lending to NBFCs under priority sector be given a ‘permanent’ status in the upcoming budget. An increase in the limits of total priority sector lending by banks would also help the overall sector as it will ensure liquidity support. Since the credit and gold loan demand in the country has also indicated revival signs, we expect recapitalisation of public sector banks to improve their lending capacity and alignment of single exposure limit for banks’ exposure to gold loan NBFCs with that of other NBFCs for greater liquidity flows for taking further exposure towards gold loan NBFCs."
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