Perspective on RBI's Draft Report of its KUB Rao Committee - Muthoot Finance Ltd's Managing Director Mr. George Alexander Muthoot

Mr. George Alexander Muthoot, Managing Director, Muthoot Finance Ltd, "Muthoot Finance welcomes the Rao Committee Report and applauds the committee for its balance and fair report. The committee's report on the gold loans sector is very positive. The release of the report will remove the negative perception created in the market about gold loan business.

Apart from suggesting some of the hygiene factors to be inculcated, the gold loan companies' role in monetizing and creating liquidity for the gold available in the country has been appreciated in the report.

This report has also concluded that gold loans have no impact on gold imports; in fact the committee has reiterated the fact that gold loans NBFCs are doing socially useful function.

The report has also outlined that there is no systemic implications in the financial system because of Gold Loan NBFCs. Also the report outlines that there is no risk to gold loan companies because of various factors like volatility in prices of the gold, sources of funds, capital adequacy and asset quality.

The recommendation of the committee for prescribing the appropriate loan to value ratio is found suitable, while its recommendation that there is no case for conceding level playing field for the gold loan NBFC with the bank is highly appreciated"

Source : Equity Bulls

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