Non-banking financial companies (NBFCs) dealing in gold loans have written to the Reserve Bank of India (RBI) for an extension in time before it disallows banks from treating gold loans to NBFCs as priority sector advances. The letter was written under the aegis of the Association of Gold Loan Companies in India.

RBI recently disallowed banks from treating loans to NBFCs who on lend it as gold loans to be treated as priority sector advances.

Thomas George Muthoot, director, Muthoot Fincorp, said, “We have written to the RBI for extension in time by at least six months specially during the year end as both the banks and NBFCs need more time to meet their target and arrange for fresh funds.”

There are three big gold loan NBFCs such as Mannapuram Finance, Muthoot Fincorp and Muthoot Finance, who were largely depended on banks for their gold loan business.

For banks, it was a secure lending and it helped them meet their priority sector obligations.

Meanwhile, such NBFCs will also look at home financing. Muthoot Fincorp on Tuesday launched a housing finance subsidiary to tap the middle-income group with an average ticket size of Rs 3,00,000 to Rs 10,00,000 with an interest rate of 14-15 per cent.

Thomas Muthoot, ED of Muthoot Pappachan Group, said they are starting with an initial corpus of Rs 100 crore. “We will launch innovative products and then, we will look at National Housing Bank for refinance, banks, private equity and multilateral agencies for funding.” The subsidiary will have 25 branches.

“The objective is to tap the opportunity in the middle and low income segment which is yet to be explored fully. We will target customers in the informal segment who have a monthly income of Rs 10,000 to Rs 30,000,” said Maneesh Srivastava, CEO Muthoot Housing Finance.

Pawan Aggarwal, director ratings at rating and research firm Crisil, said, “Housing finance is not something that gold loan NBFCs in particular will undertake. As part of the diversification exercise, many NBFCs will get into home finance.”