Indian Banking - Gold loans taken from NBFCs by banks not priority sector lending - Motilal Oswal

INDIAN BANKING: Gold loans taken from NBFCs by banks not priority sector lending; Negative for gold financing NBFCs

RBI has issued guidelines for bank's classification of gold loans taken from NBFCs, and said that they same would not form part of priority sector lending.

In our view, this is the first step by RBI to control the high growth rate in gold financing by NBFCs and indication for banks to make effort to push gold lending.

The initial impact on this would result in increase cost of funds and decline in assignments of loans by gold financing NBFCs.

Biggest mono-line gold financing listed NBFC is Manappuram General Finance (MGFL IN, Mkt Cap US$1b, CMP Rs110, Not Rated).

Some more regulatory actions can be expected considering RBI stance to tighten the regulation for NBFCs.

Source : Equity Bulls

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