Mumbai | April 9, 2025: Shares of Muthoot Finance Ltd plummeted nearly 9% in early trade on Tuesday, leading a sector-wide sell-off in gold loan and non-banking financial company (NBFC) stocks. The sudden drop followed the Reserve Bank of India’s (RBI) announcement of forthcoming comprehensive guidelines for loans against gold and tighter norms for co-lending practices across all regulated entities.
At 11:20 am IST, Muthoot Finance shares were trading at ₹2,088.80, down ₹203.85 or 8.89%, compared to the previous day’s close of ₹2,292.65. The stock had opened at ₹2,307.55 but saw sharp selling pressure, hitting a low of ₹2,011.25 within hours of market opening.
Regulatory uncertainty weighed heavily on NBFC stocks as RBI Governor Shaktikanta Das and Financial Services Secretary Sanjay Malhotra addressed the press after the April monetary policy announcement, signaling tighter scrutiny for the gold loan segment. Malhotra revealed that “comprehensive guidelines will soon be issued for gold loans and non-fund-based lending,” causing immediate nervousness among investors with exposure to NBFCs heavily reliant on gold-backed products.
While Muthoot bore the brunt of the impact, other stocks felt the heat as well. IIFL Finance shares were down 8%, Manappuram Finance dropped 3%, and Cholamandalam Investment and Finance Company fell 4.7%, trading at ₹1,395 per share.
The reaction reflects investor apprehension that stricter regulations could curb loan disbursements, increase compliance costs, and squeeze margins—particularly for firms like Muthoot and Manappuram that derive a substantial chunk of revenue from gold-backed credit. “This sell-off is driven by regulatory fear. Markets were expecting a status quo, but comprehensive gold loan norms may affect future disbursements and asset quality,” said a senior equity strategist at a Mumbai-based brokerage firm.
Compounding the market reaction was the RBI’s decision to cut the repo rate for the second consecutive time, reflecting growing concerns about India’s slowing growth amid global trade tensions, particularly new US tariffs. Although a lower repo rate typically helps lenders, the market focus remained squarely on the anticipated regulatory tightening in gold finance.
Notably, the central bank also extended co-lending guidelines to all regulated entities, a move interpreted as the RBI’s attempt to impose more accountability across the shadow banking sector. Muthoot faces a steep intraday drop, with its intraday low at ₹2,011.25 on April 9, 2025. The company’s market cap stood at ₹83,650 crore, with a 52-week high of ₹2,435.40 and a low of ₹1,509.70, alongside a P/E ratio of 16.79 and a dividend yield of 1.15%.
As of 11:20 am, Muthoot’s intraday drop of ₹203.85 represents one of its steepest single-day falls in recent quarters, signaling a crisis of confidence in the segment’s near-term outlook. Analysts suggest that further clarity on the RBI’s upcoming guidelines will be critical in determining whether the current fall is a knee-jerk reaction or the beginning of a prolonged re-rating for gold loan companies. “Until the RBI details its proposed norms, we expect volatility in Muthoot and Manappuram to persist,” said an NBFC analyst at Motilal Oswal.
In a related development, RBI Governor Sanjay Malhotra emphasized that loans against the collateral of gold jewelry and ornaments—commonly known as gold loans—are extended by regulated entities for both consumption and income-generation purposes. He stated, “In order to harmonize guidelines across various types of regulated entities, to the extent possible, while keeping in view their differential risk-bearing capabilities, we shall issue comprehensive regulations on prudential norms and conduct-related aspects for such loans.”
In March, the RBI had reportedly planned to ask lenders to follow stricter underwriting processes for gold loans and monitor the end-use of funds as it tries to cool growth in the fast-growing segment. The announcement also came alongside a broader monetary easing, as the RBI lowered its key repo rate by 25 basis points to 6%, marking its second consecutive cut.
Other banks also felt the pressure, with Indian Bank and Bank of Baroda falling nearly 4%. Canara Bank, Punjab National Bank, and State Bank of India slipped between 1.5% and 2%. Bandhan Bank, RBL Bank, YES Bank, and ICICI Bank declined between 1% and 3.5%.
Market analysts are keeping a close watch on how these developments will unfold, particularly given that gold loans constitute 98% of Muthoot Finance’s overall Assets Under Management (AUM), 50% for Manappuram Finance, and 21% for IIFL Finance. The uncertainty surrounding the upcoming guidelines has created investor concern, with many questioning whether the new rules will tighten lending standards or increase compliance costs.
As the market continues to react to the RBI’s announcements, investors are advised to wait for the detailed guidelines from the RBI before making portfolio decisions. Volatility may persist, and a clearer picture will emerge once the regulatory framework is made public.
In summary, the situation remains fluid as Muthoot Finance and its counterparts navigate the challenges posed by regulatory changes and market volatility. The coming days will be crucial for investors and stakeholders in the gold loan sector.
