KOLKATA: After a sluggish three year period, Muthoot Fincorp, a leading non-banking financial company (NBFC), is eyeing 27% growth in its gold loan business in FY17.
The NBFC attributes this growth to the rally in gold prices from the beginning of this year and exit of a number of players from the gold loan business following RBI regulations.
Along with the projected growth in the gold loan business, the NBFC has been able to bring down the cost of fund as well by 60 basis points in the last six months and is aiming to bring it down by another 40 basis points in the coming months.
Talking to ET, Thomas George Muthoot, director, Muthoot Fincorp, said "We are availing bank funds mostly as working capital demand loan (WCDL) and therefore the interest rate is market related.
Through a combination of WCDL and commercial paper we have been able to bring down the rate of interest by more than 60 basis points in the last six months. If the same trend continues, we will bring it down by another 40 basis points in the next two quarters. Our aggregate cost of fund is around 10.5%-10.6% on an annualised basis."
Working Capital Demand Loan (WCDL) is a short-term revolving loan facility given for the working capital requirement of a company. A bank will quote a rate on WCDL depending on its current cost of funds to which the customer must agree.
Muthoot added that their gold loan lending rates are competitive. "We pass on the benefits of lower cost of fund to our gold loan customers. We maintain the yield by reducing the cost of fund. The rate of interest for gold loan customers varies between 12% and 18% depending on the schemes which they opt,"said Muthoot.