Kerala-based non-banking financial companies (NBFCs) who have been leaders in the gold loan market

RELATED ARTICLES Financial worries dog bond market, prices fall

in the southern region, such as the Muthoot and the Manappuram groups, are drawing up aggressive expansion plans into other regions of the country to offer loans against the yellow metal.

V P Nandakumar, chairman, Manappuram group, told Financial Chronicle the NBFC is planning to venture beyond the South in a big way. “We plan to expand beyond the South. Of the 500 branches that we plan to add to our portfolio over the next two years, 60 per cent of expansion will happen in non-South regions. The expansion would also ensure that the weightage of the southern region in our total gold loan business would come down from 80 per cent to close to 66 per cent,” he said.

Manappuram has close to 800 branches as of now and 60 per cent of these branches are located in the South, including in Kerala, Tamil Nadu and Karnataka, among others.

T Muthoot Group plans to add 400 branches over the next two years and of this, a majority would in regions other than the South, according to company officials. Already, the group has increased its branch presence by six-fold over the past three years to 108 at present from18 branches till 2006. Primarily known as a dominant player in the south Indian market, T Muthoot Group has more than 1,300 branches in all, most of which are in the southern region.

“We are by far the market leader in the gold loan segment in the southern part of the country and we see no competition for us even in the northern region or other regions. We offer this facility from more than 100 branches in Delhi and none of the banks offer this facility at even half this level,” said Avinav Choubey, marketing manager, T Muthoot Group.

NBFCs, put together, account for more than 75 per cent of the gold loan market in the country.

In contrast, some banks, which are trying to push gold loan disbursement in areas such as the National Capital Region (NCR), have limited number of branches that can verify the purity of gold jewellery and disburse loans against it. For instance, Mangalore-based Syndicate Bank offers this facility from only 18 branches in the NCR.

Similarly, HDFC Bank is offering the facility in fewer than 10 branches in the Delhi region.

Asked about whether banks are facing stiff competition from NBFCs in the gold loan segment, K Devananda Upadhyaya, general manager, Syndicate Bank, said, “NBFCs are rapidly expanding because they do not have to worry about KYC (know your customer) norms and hence, competition has become intense. We are witnessing larger interest among people regarding loans against gold from the northern region as well, and that is why we have offered 18 branches for the same as compared with 11 branches sometime ago.”

A HDFC official, who did not wish to be named, echoed Upadhyaya’s views. “Undoubtedly, competition is getting tough in the gold loans segment. We feel that by merely expanding rapidly, NBFCs will not be able to capture the northern market since banks like ours have a lot of credibility with the public,” the official said.

Asked why HDFC Bank is mostly looking at regions other than the South for its gold loan scheme, the official said, “The northern and western markets are underpenetrated (for gold loans) and the growth opportunity is higher in these regions. On to other hand, the southern market for gold loan is mature and has lower growth prospects.”