The gold plating strategy


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Gold Loan - Muthoot Fincorp Limited, mainly focuses on Non-Banking Financial services sector such as Gold Loan, Auto Loans, Business Loans etc.

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The gold plating strategy

  1. 1. The Gold Plating Strategy
  2. 2. <ul><li>In the country’s privately held gold, only 10 per cent is in the loan market. Of the 10 per cent, only around 25 per cent is in the hands of organised players. </li></ul>
  3. 3. <ul><li>The rest is with the pawn shops and money lenders, says ICRA Management Consulting’s Gold Market Report 2010. </li></ul>
  4. 4. <ul><li>The companies are today competing in giving loans as quickly as possible. While M-Fin and Manappuram offer loans in five minutes, Fincorp and Muthoot Mercantile attracts customers with two- and three-minute offers. </li></ul>
  5. 5. <ul><li>Gold financiers cater to the rural, semi-urban and urban markets. In the rural area, the gold loan is taken mostly for agriculture and household purposes. </li></ul>
  6. 6. <ul><li>Agriculture, household and trading requirements leads to loans in semi-urban geographies. </li></ul>
  7. 7. <ul><li>In urban and metro areas, it is more of margin money for buying house, household-hospital-education expense and small-time trading requirements. </li></ul>
  8. 8. <ul><li>In Delhi and Mumbai, there is demand for gold loan under equated monthly instalment (EMI) scheme. Muthoot Fincorp has a loan product that offers payment through EMIs. </li></ul>
  9. 9. <ul><li>The next natural step for the gold loan companies is a banking licence. </li></ul>
  10. 10. <ul><li>It would be a boon for them as the companies could reduce the cost of funds by accepting deposits. </li></ul>
  11. 11. <ul><li>As the interest for these deposits is low, the financiers could utilise this fund for lending to gold loan customers at higher interest rates. </li></ul>
  12. 12. <ul><li>But with the industry expanding, and companies luring customers with heavy advertising, regulatory interventions are in order. </li></ul>
  13. 13. <ul><li>Reports say RBI is already probing the books of some companies to assess the implication of concentration of risk that could make the non-banking sector shaky in the event of a sharp fall in gold prices, as has happened with silver recently.  </li></ul>
  14. 14. <ul><li>The central bank is worried that any sharp correction in gold prices would adversely impact the operation of these companies as the value of the underlying asset would decline. </li></ul>
  15. 15. <ul><li>For now, the prospects look bright for these gold financing companies. However, they may face more stringent regulatory environment in future, and this could dent their business. </li></ul>
  16. 16. <ul><li>Another threat is entry of more organised players with better resources. </li></ul>
  17. 17. <ul><li>Last year, for example, Mahindra Finance launched its gold loan products in Kerala.  </li></ul>
  18. 18. <ul><li>The lucrative nature of the gold loan market attracts many bees. The three musketeers will have to sweat a lot to stay in top order. </li></ul>
  19. 19. Contact US <ul><li> </li></ul>