Shares in gold loan firms such as Muthoot Finance and Manappuram Finance fell sharply on Tuesday after the Reserve Bank of India announced new restrictions to curb demand for gold.
The central bank on Monday said no advances should be given by non-bank financial companies (NBFCs) against bullion, primary gold and gold coins. NBFCs should not give loans for the purchase of gold in any form including primary gold, bullion, jewellery, coins, units of gold exchange-traded funds (ETFs) and units of gold mutual funds, the central bank added.
Muthoot Finance traded 2.5 per cent lower at Rs 143.40 after earlier falling to Rs 142, while Manappuram Finance shares were down 1.2 per cent at Rs 16.80 after earlier falling to Rs 16.75. These stocks underperformed the broader Sensex, which traded flat at 20,022 as of 11.15 a.m. (Track stocks)
Banks, too, would not be allowed to give loans against units of gold ETFs and gold mutual funds, the RBI said. As these products are backed by bullion and primary gold, the restriction on grant of loan against gold bullion will be applicable to loan against units of gold ETFs and units of gold mutual funds, the RBI said in a statement.
The RBI also said that while giving loan against gold coins sold by banks, the lenders should ensure that the weight of the coins does not exceed 50 grams per customer.
Government has taken several steps recently, including raising import duty, to curb the inbound shipments of gold. RBI too had put restrictions on banks on gold imports, which
Worried over the widening current account deficit, Finance Minister P Chidambaram had indicated last week that the government and the RBI could take more steps to check gold imports.
Gold imports jumped by 138 per cent to $7.5 billion last month, the highest so far this year, pushing up the trade deficit to $17.7 billion.
(With inputs from agencies)