Muthoot and Manappuram Finance Stocks Surge Up to 9% Following RBI’s Cash Disbursal Advisory | Market News

The Reserve Bank of India (RBI) has issued a directive to gold loan Non-Banking Financial Companies (NBFCs), stating that no loan amount exceeding Rs 20,000 should be disbursed in cash. This move has sent shockwaves through the market, particularly impacting companies like Muthoot Finance and Manappuram Finance.

Shares of these gold financing companies plummeted on Thursday, with Muthoot Finance witnessing an 8.8% decline and Manappuram Finance shedding 8.3% on the BSE. The RBI’s caution comes in light of the provisions of Section 269 SS of the Income Tax Act, 1961, which prohibits individuals from receiving more than Rs 20,000 in cash as a loan amount.

Global brokerage firm Morgan Stanley has predicted that NBFCs will need to make operational changes due to this directive, leading to a “transient financial impact.” Muthoot Finance and Manappuram Finance heavily rely on gold loans, with a significant portion of their disbursements being in cash.

At the end of the December quarter, Muthoot Finance reported a 14% increase in standalone net profit, reaching Rs 1,027 crore, while Manappuram Finance saw a 46% rise in net profit to Rs 573 crore. Despite these challenges, both companies have shown resilience in their financial performance.

As the gold loan NBFCs navigate through these regulatory changes, investors and analysts are closely monitoring their strategies to mitigate the impact on their operations and financial health. The market remains cautious as these companies adapt to the new guidelines set forth by the RBI.