Yes and giving good window to accumulate!
Company To Consider Issuance Of Private Placement Of Rated, Listed, Secured, Redeemable Ncds
too many people writing obituaries of gold finance companies. Don’t know if it is a contrarian sign to add more or just take an exit route to reduce underperfoamnce of PF.
Gold loan companies used to offer long tenure loans until the crisis in 2012-14 when gold prices declined. Since these are balloon loans, interest is added to the principal and repaid at the end of the loan. Accrued interest becomes an unsecured loan. Now these companies are offering shorter tenure loans of 3 month and 6 months so that accrued interest plus principal does not go beyond value of the collateral. However, now customers are having trouble repaying the loan in six months and that is causing NPAs to rise.
As per revised RBI NPA recognition norms, these NBFCs have to recognize an asset as NPA sooner than before. These companies are letting customers take more time to replay the loans instead of auctioning the gold as they fear losing customers if they auction the collateral. With loan book growth in single digits, investors are asking for a pickup in growth and not slowdown.
Manappurum is trying out the MFI route as MFIs are offering similar interest rates without collateral and taking away Mana’s customers. Muthoot is somewhat slow in MFI route as defaults are more. Overall, lending to the bottom of the pyramid is a risky business because customers can often and suddenly lose ability to repay.
Actually, the NPAs primarily come from the big guys like Vijay Mallya and JPA. The poor guy usually pays up. He can’t run away or hire a lawyer. He can’t siphon cash as well. MFIs have better repayment rates than most of the banks or even housing finance cos.
We should use facts and numbers as well!
Four Muthoot Finance branches cheated by pawning silver jewelry covered with a thick coat of gold. Wonder how gold loan companies control this risk.