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MUMBAI : Kerala-based gold loan company Muthoot Finance has seen a sharp improvement in its asset quality in the fourth quarter of FY21, and is expecting a turnaround in business from the second quarter of FY22. It also expects 15% gold loan growth in FY22 due to higher demand. In an interview with Mint, Muthoot Finance managing director George Alexander Muthoot shared his outlook for the sector and why the company is reducing its footprint in Kerala. Edited excerpts:

Have you seen gold auctions in FY21 like other rival non-banking financial companies (NBFCs)?

Our practice is different from other companies. This year, we have done only 171 crore of gold auctions, or 0.03% of the auctions. Last year, it was 500 crore and the previous year, it was 1,000 crore.

Our loan tenure is 12 months. Others follow a three-month tenure. If the customer is unable to pay interest, the only option is to classify it (the loan) as a non-performing asset (NPA). For us, only after 16 months do the loans become an NPA.

Customers get more time to repay. There are no EMIs (equated monthly instalments). By doing this, we have not lost any money.

Are more people rushing to get gold loans?

I’m sure we will see growth like last time once business opens up. They are our mainstay customers. Once business restarts, they will need loans. At that time, just like last year, we will see good growth. Last year’s first quarter was also a washout. Business picked up in the second and third quarters.

What are your estimates for gold loan growth in FY22?

Over the years, we have been saying 15% growth and we will continue to give the same guidance this year also. We say 15%, but if things look okay, we can always overachieve.

How are you looking to compete with banks, which are getting aggressive in this space?

During the second and third quarters, the gold loan market has expanded. Our business has not been taken away. They have been able to get new business or new customers, who were hitherto not taking gold loans earlier. Maybe such customers are more comfortable taking a loan from a bank as against an NBFC.

Banks are using this opportunity with aggressive publicity. Probably some customers have gone. We added 300,000 customers. New customers are coming to us and going to banks also. Lots of gold are lying around. No need to compete with banks.

How much does Kerala contribute to your business?

Kerala contributes 2% of the business. We have deliberately reduced business in Kerala. Banks are doing business here. They are getting a new set of customers. In Kerala, we have not lost business. In fact, we have gained business despite having closed branches.

Why did you decide to reduce business in Kerala?

The communist government started some labour issues in Kerala branches. We closed 120 branches. Branch business in Kerala is very low. Per branch business in Kerala is 2.5 crore. Outside Kerala, it is 12.5 crore. Productivity here is low, business is also low.

What is your outlook on non-gold loan growth?

It was not the best year for non-gold loan business for us. We have reduced our focus there. Prior to last year, it was 12%-plus non-gold loans. This year, it is 10% non-gold loans and 90% gold loans.

From the second quarter (of FY22) onwards, we expect non-gold loan business to pick up. Now, it is declining.

Which segments are seeing growth?

Microfinance is growing in Tamil Nadu and other areas. Vehicle finance and affordable housing loans, we have de-grown. Last year, lending was limited. From Q2 (of FY22), we expect it to revive.

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