Muthoot Finance Share Price Falls Over 8% Following RBI’s Draft Guidelines on Gold Loans

Market Performance

On April 11, 2025, Muthoot Finance's share price declined by 8.13%, closing at ₹1,965. This marked the stock's lowest point in three months and extended a two-day losing streak. The drop followed the Reserve Bank of India's (RBI) release of new draft regulations targeting gold loan practices.

Regulatory Developments

The RBI introduced draft guidelines on April 9, 2025, to standardize the gold loan process across all lending institutions. These proposed rules are designed to enhance transparency and borrower protection.

Key provisions of the draft include:

• Uniform documentation standards for evaluating pledged gold cover gross and net weight and purity.
• Mandatory presence of borrowers during the evaluation of gold collateral.
• All assessment procedures are required to be publicly disclosed on lenders' websites.
• Issuance of a certificate outlining deductions related to stone weight, fastenings, or impurities, with clear communication to the borrower.
• Detailed loan agreements specify the collateral, assessed value, auction terms, repayment timelines, and settlement details.
• Use of the borrower's preferred or local language for all communication.
• In cases involving illiterate borrowers, key loan terms must be explained before a witness.

Company Overview

Muthoot Finance is a major non-banking financial company (NBFC) in India that focuses primarily on loans backed by gold jewelry. As of March 13, 2025, the company reported that it had exceeded ₹1 lakh crore in Gold Loan Assets Under Management (AUM). Approximately 98% of Muthoot Finance's total AUM comprises gold loans, underlining its strong dependence on this financial product.

Financial Snapshot

Gold Loan AUM: ₹1 lakh crore (as of March 13, 2025)

Market Trends

Muthoot Finance's stock experienced a significant downturn between August 2021 and June 2022. It later rebounded strongly, gaining 145% by March 2025 and reaching a record high of ₹2,435. However, the share price dropped 16% in April, marking the steepest monthly decline since March 2020.

Conclusion

The decline in Muthoot Finance's share price coincides with the RBI's new draft norms aimed at regulating gold loan practices. While the company remains a dominant player in gold-backed lending, these changes may require significant operational adjustments to ensure compliance and maintain borrower transparency.