New guidelines have come from the Reserve Bank of India in terms of gold financing. How will that impact Muthoot Finance?
George Alexander Muthoot: It is not a selective instruction, it is a universal instruction for all the NBFCs. It is not any selective instruction for Muthoot Finance, etc, it is an instruction for all, a universal instruction for all the NBFCs. It is applicable to all NBFCs. The Reserve Bank is clarifying that more than Rs 20,000 should not be paid in cash. I do not think there is any impact of that because even otherwise most of our customers have bank accounts and we have been doing real-time transfers for a long time. So we just have to tell our customers that instead of cash, they will have to take any loan above Rs 20,000 through the bank. It is not an issue at all and we do not see any big challenge there.You would appreciate our curiosity about what one really needs to know and what the market is really panicking right now about is very specifically will it impact your volumes yes or no and if so by how much, ballpark?
George Alexander Muthoot: I am 100% sure it is not going to impact our volumes at all. It is not going to impact our volumes.
How will the new RBI directive change the ratios for gold NBFCs?
George Alexander Muthoot: Customers sometimes for convenience’s sake ask for Rs 30,000, 40,000 in cash. We tell them we will transfer it to your bank account and today everybody has a bank account and we have actually been mapping all the bank accounts. So, real-time transfers are a need of the hour now and most of our customers have real-time transfers. They pay the interest. They do a lot of transactions. For convenience sake, some people come here that’s all.But you also have to appreciate that the gold borrower who is taking the loan may perhaps not be very okay about giving details of the bank account. There could be a resistance at that level. Do you think that that could be a restrictive factor for loans above Rs 20,000?
George Alexander Muthoot: No, because even now, many customers are taking this way only. We have to educate the customer, that’s all. There is no such customer who does not want to give bank accounts, etc. 80% of them pay interest also online. So that is not a challenge. We do not see any challenge there, just an instruction and it is just a clarification. Earlier there was some confusion whether we can give Rs 20,000 and more in cash. Now, it is clarified that anything more than Rs 20,000 will be in cheque only and in bank only. That is all, it is just a clarification.
What percentage of your book qualifies for loans which are more than Rs 50,000?
George Alexander Muthoot: No, there may be loans more than Rs 50,000 but the many of them we will be able to just transfer. Nobody is going elsewhere because the customer will not get cash elsewhere. All NBFCs are the same way.
In the industry, Muthoot has got very different lending norms and very different levels of risk management, but that may not hold true for the entire NBFC or gold NBFC sector, especially for some of the smaller unorganised players. Can that be an impediment for smaller players?
George Alexander Muthoot: If it is an NBFC, this rule is applicable. Unorganised, there is no control for them. For any NBFC, it is applicable whether big, small, large, medium if it is NBFC this is applicable.
Investors are getting an impression that the Reserve Bank of India is really scrutinizing and perhaps re-looking at the entire gold NBFC/lending mechanism.
George Alexander Muthoot: Most of the Kerala-based NBFCs are only in Kerala. In the last 15 years, RBI has got a very good view of what is happening in the Kerala-based NBFCs. So, there, I do not think they need anything more to do. This is just a clarification that for more than Rs 20,000 payment, there should be cheques. So, customer comes and we say okay, it is a bank transfer and we are even now doing all these bank transfers only.
So, just wanted to understand in the long haul given that this step has been taken by the Reserve Bank. Do you think that they will continue to step up vigil against non-compliant lenders? I am just talking about the ecosystem as a whole?
George Alexander Muthoot: All the NBFCs are very compliant. If there is an NBFC which is not compliant, they take action which we have seen also. We have been inspected by the RBI for the last 15 years, all the NBFCs here including Manappuram and every last 15 years. So, if there is any non-compliance immediate action that they do, they do not wait for anything like this.