India’s biggest lenders that use gold jewelry as collateral say earnings may stall this year as central bank regulation aimed at reducing risk in the banking system chokes off growth.
Net income at Muthoot Finance Ltd. may rise 10 percent in the year that started April 1 after surging an average 86 percent in the past five years, according to Managing Director George Alexander Muthoot. Profit at smaller rival Manappuram Finance Ltd. (MGFL) may be little changed, said I. Unnikrishnan, managing director at the Thrissur, India-based company.
“Our loan disbursements have come down” due to the regulatory changes, Unnikrishnan said in an interview yesterday. “We see flat asset growth this year.”
Muthoot (MUTH) and Manappuram are losing clients to money lenders after the Reserve Bank of India tightened rules to curb expansion at the finance companies and reduce risk at their creditors, mainly commercial banks. Manappuram, endorsed by Bollywood actor Akshay Kumar, will add no branches on a net basis this year while Muthoot will cut office openings by 75 percent. Manappuram has plunged 50 percent this year making it the worst performing stock in the BSE200 Index.