Muthoot banks on economy bounce-back; to get back into home, vehicle loans

Muthoot Finance Ltd, the largest non-banking finance company (NBFC) in gold loan business, which had halted expansion in non-gold businesses - home, vehicle and personal loans - after the Covid-19 outbreak to focus on the all-weather gold loan business, now plans to look at these verticals afresh.

Expecting a bounce-back in the economy in 2022, Muthoot is looking to revamp its home and vehicle financing business. The NBFC will increase the lending in the space, especially to cater to the existing gold loan customers, said George Alexander Muthoot, managing director, Muthoot Finance Ltd (MFL).

MFL’s gold loan under management increased to ₹5.47 lakh crore in September 2021 from ₹4.08 lakh crore in March 2020. However, the other loans portfolio shrunk to ₹4,647 crore from ₹8,382 crore in this period.

The company’s home loan segment was hurt when the builders in the affordable category were not delivering the projects on time, especially after the pandemic.

“The vehicle financing is not a good sector today. But it will pick up probably next year. So we have restarted lending,” Muthoot said.

“In the last two years, especially after the outbreak of pandemic, we halted the issue of other loans. The customers continued their loan repayments in this period and it resulted in the decline of other loans under management to half,” he added.

MFL offers vehicle, home and personal loans to its existing customers. For a 360-degree connect, the company offered the other loans to its customers, says the MD. It was also for preventing the banks from poaching the gold loan customers.

“If the economy is doing well, there'll be demand for funds. Our gold loan customers are generally small businessmen, shopkeepers, small traders, among others. When the economic activity picks up, they will need capital for stocking goods,” Muthoot said.

MFL has 4,600 branches across India. Half of it is in north and north-eastern states. The lender started the gold loan business in Kerala and massively spread out about 15 years back. About 25 years back, 95% of its business was from Kerala. After their pan-India expansion, the Kerala business reduced to just 2.5%, while the other states contributed 97%.

“We have over 200 branches in Delhi-NCR and 300 in Punjab. Uttar Pradesh and north-eastern states also contribute substantially to the business,” informed Muthoot.

The NBFC is not much keen on increasing the number of branches, but focused on enhancing the business at each branch. “About six years ago, the average business in each branch was around ₹5 crore. It has increased to over ₹11 crore now,” he said.

MFL will reorganise the underperforming branches and open new branches wherever there is scope to scale, he added.

MFL has a customer base of over one lakh, and 178 tonnes of gold jewellery is present with it as collateral for loans.