The Indian stock market witnessed a significant development recently during market hours, as breaking news emerged directly from the Ministry of Finance. The news has the potential to bring temporary relief to both gold loan borrowers and companies engaged in the gold loan business.

Finance Ministry Requests RBI for Leniency

The Finance Ministry has officially requested the Reserve Bank of India (RBI) to ensure that the interests of small gold loan borrowers are not negatively affected by the upcoming draft guidelines. These guidelines are aimed at increasing regulation in the gold loan sector due to rapid and potentially risky growth patterns seen in the past year.

During the financial year 2025 and the current fiscal year 2026, there has been an extraordinary surge in various types of loans, particularly unsecured loans such as credit card lending. Gold loans have also seen massive growth—around 30% year-on-year. This prompted RBI to express concern in past Monetary Policy Committee (MPC) meetings and warn about rising complaints regarding companies violating rules to boost profits.

Some of these violations include:

• Issuing gold loans without proper checks on gold purity
• Failing to secure proper collateral
• Violating the basic Loan-to-Value (LTV) rule, which allows only 75% of the gold value to be lent

In response, RBI issued stricter regulations and even hinted at conducting audits to monitor compliance. This led to a decline in the share prices of companies operating in the gold loan business, due to the perceived regulatory burden.

Focus on Small Borrowers and Postponement of Rules

Now, the Finance Ministry has asked RBI to ensure that borrowers seeking small-ticket loans—particularly those up to ₹2 lakh—are not adversely impacted. The ministry emphasized that small borrowers need loans quickly and with minimal hassle, and introducing heavy paperwork or strict requirements might severely affect them. The Department of Financial Services (DFS) echoed the same concern.

In addition, the Finance Ministry requested RBI to postpone the implementation of the new gold loan rules until January 2026. This delay would give both companies and borrowers time to adapt to the upcoming regulations.

Positive Impact on Gold Loan Companies

This announcement has come as a huge relief for gold loan companies, especially listed ones like Muthoot Finance and Manappuram Finance. The immediate effect was seen in Muthoot Finance’s stock, which jumped 8% in a single day after the news broke.

Muthoot Finance has been the market leader in gold loans and recently reported strong financial performance:

• Current quarter profit: ₹1,444 crore
• Year-ago profit: ₹1,182 crore
• Previous quarter profit: ₹1,392 crore

Earnings per Share (EPS) also rose:

• From ₹28.37 to ₹34.60 to ₹36.81 over recent quarters

This indicates growth both quarter-on-quarter and year-on-year.

As for the shareholding pattern (latest available data):

• Promoters: 73.35%
• FIIs and DIIs: 11% each
• Public holding: Less than 4%

This explains why retail investor activity in the stock is limited—it is tightly held by promoters and institutions.

Manappuram Finance – Mixed Performance

Manappuram Finance, another major player in the gold loan segment, also showed positive market movement on the same day. However, its financial performance has been inconsistent. The latest result showed negative earnings, and even after accounting for tax adjustments, it reported a loss—unlike in previous quarters, where at least some positive performance was observed.

Historical EPS data shows:

• EPS has ranged between 2 to 25 over the past decade, showing high variability.

In contrast, Muthoot Finance’s earnings trajectory over 10 years shows:

• Steady growth with EPS rising from ₹16 to ₹132
• Nine out of ten years have seen rising earnings, with only minor dips

Manappuram’s Shareholding Pattern:

• Promoters: 35%
• FIIs: 28%
• DIIs: 8%
• Public: 28%

Unlike Muthoot, Manappuram has a more evenly distributed shareholding with more public and institutional involvement.

In summary, the Finance Ministry’s intervention has brought temporary relief for gold loan businesses and small borrowers alike. There will be no immediate restrictions, and the upcoming RBI rules are expected to be implemented only by January 2026. This development is seen as a major positive from a business perspective, especially for Muthoot Finance, which leads the sector both in scale and financial performance.

The gold loan business, for now, continues as usual. When the new rules come into effect in 2026, the impact can be reassessed. Until then, the segment remains an attractive space with strong potential, particularly for well-managed companies like Muthoot Finance.

Disclaimer:
This article is for informational purposes only and should not be considered as financial or investment advice. Readers are advised to consult with a certified financial advisor before making any investment decisions. The author and the website are not responsible for any financial losses incurred based on the information provided in this article.