INTRODUCTION

Every modern economy is based on a sound financial system a financial system. a set off
institutional arrangements through which financial surpluses are mobilized from the unit
generating surplus income and transferring them to the others in need of them. The activities
which include production, distribution, exchange and holding of financial assets instruments of
different kinds by financial institutions, banks and other intermediaries, of other market. Among
these organizations, are banks, credit card companies, insurance companies, consumer finance
companies, stock brokerages, investment funds and some government sponsored enterprises?
The financial markets have two major components; they are money market and capital market.
Money market
The money market refers to the market where borrowers and lenders exchange short-term funds
to solve their liquidity needs.
Capital market
The capital market is a market for financial investments that are direct or indirect claims to
capital.
Securities market
It refers to the markets for those financial instruments claims obligations that are commonly and
readily transferable by sale. It has two inter dependent and inseparable segments the new issues
(primary) market and the stock (secondary) market. the secondary market enables those who
hold securities to adjust their holdings in response to changes on their assessment of risk and
return. The primary markets provide the channel of sale of new securities.
Stock market
A stock market, or equity market, is a private or public. Market for the trading of company stock
and derivatives at an agreed price, these are securities listed on a stock exchange as well as those

only traded privately. The size of the world stock market is estimated at about $36.6 trillion us at
the beginning of october2008
FOREX MARKET
The foreign exchange market (currency, forex , or FX) market is where currency trading takes
place .it is where banks and other official institutions facilitate the buying and selling of foreign
currencies . The FX market is one of the largest and most liquid financial markets in the world,
and includes trading between large banks, central banks, currency speculators , corporations,
governments, and other institutions.

What is Gold Loan?

As the name suggest its loan against Gold. Its the most convenient way to receive cash in no
time from any NBFC/Bank by pledging your Gold ornaments/Coins/bars/Exchange traded funds
ETFs/ SBI gold certificates etc., this is one loan product which comes with minimal
documentation & no processing time in short its over the counter product.
Product is designed in a way it ensures hassle free process for the customer & loan availed can
be put to any use.
Loan amount eligibility is evaluated basis on the Gold value banks usually fund 70-80% of the
gold market value & on repayment of the loan gold deposits are returned back to the customer.
This loan comes much cheaper than personal loan as its a secured product & rate of interest
ranges between 11.5-24% per annum.
Rate of interest is decided on two factors risk criteria ( What % of market value of Gold you are
availing loan if its 90% of the Gold market value then interest charged will be higher & vice a
versa for lower loan amount as compared to gold value) & customer relationship with the bank.

Features of Gold Loan:

Fastest loan disbursal

Most convenient way to arrange funds
Low Documentation
No pre-payment charges
No loan amount cap (you can avail as low as 10,000)

INDUSTRY PROFIILE

FINANCIAL SERVICES INDUSTRY

There is a potential source of confusion regarding careers in finance. On the one hand, there is a
function called finance that is common to all business enterprises, in every industry. On the other
hand, there is a financial services industry. The primary focus of this guide site is on the latter
definition. Additionally, note that the finance function is but one of many possible career paths
within the financial services industry.

INDIA'S FINANCIAL SERVICES INDUSTRY

An innovative, competitive and thriving financial services industry in any country plays a vital
role in its smooth functioning and development. India's financial services sector has posited a
stable growth curve over the years driven by sound fundamentals, rising personal incomes
corporate restructuring, financial sector liberalization and the growth of a consumer-oriented,
credit-oriented culture. This has led to the increasing demand for financial products, including
consumer loans (especially for cars and homes), as well as for insurance and pension products.
The soaring demand for financial services offers promising investment prospects.
According to the Central Statistical Organization (CSO) data, released early this year, financial
services, banking, insurance and real estate sectors rose by 9.7 % 2009-10.

BACKED WITH

A favorable demographic profile which supports a higher retail offtake - 54% of the
population is in the 15-35 years age group. India consists of a dynamic and a growing middleclass class which on a purchasing power parity basis is much larger than the entire population of
the US and a consumer credit market that is growing by more than 40% per annum.

Continuous increasing in capital expenditure by the government and private industry.

Significant opportunities in the largely untapped SME segment- which accounts for 40%
of the industrial output and 35% of India's direct exports.

India's increasing and consistent growth. As per the CSO, the Indian economy grew by an
estimate of 7.4 per cent in the year 2009-10 and is expected to grow over 8 percent in the coming
months.

Growing investment avenues across all segments in the banking and financial services
sector.

FINANCIAL SERVICES INDUSTRYS GROWTH POTENTIAL

The financial industry, or financial services industry, includes a wide range of companies and
institutions involved with money, including businesses providing money management, lending,
investing, and insuring and securities issuance and trading services. The following institutions
are a part of the financial industry:

Banks

Non Banking Financial Institution

Credit card issuers
Insurance companies
Investment bankers
Securities traders
Financial planners
Security exchanges

FINANCIAL INDUSTRY: DEMAND AND SUPPLY DRIVERS

Demands for financial products are driven by risk-reward assessments, which consider:

Potential Yield

Risk rating

Liquidity

Availability of information

Access to alternatives

The major supply drivers are:

Money supply

Interest rates

Inflation

Economic conditions

Government regulations

FINANCIAL INDUSTRY: MAJOR PLAYERS

According to the Global 2000 (annual report by Forbes), seven of the worlds top 10 companies
belonged to the financial industry. These included Citigroup, Bank of America, HSBC
Holdings and JPMorgan Chase. Their combined revenues in 2007 were worth $645 billion,
down from the 2006 high of $785 billion.
According to the Fortune 500 rankings, in 2006 financial services generated $257 billion in
profits, a third of total Fortune 500 profits. In 2008, however, they lost a staggering $213 billion,
a total swing of $470 billion. Big players on the list, such as Citigroup and Bank of America,
may only be alive today thanks to government money.
The finance industry is an industry in itself as well as an ancillary that supports other industries.
Trade and commerce across the world would come to a standstill if there was no means to fund,
pay and protect the transactions, hence the need for governments to support the financial services
industry when companies that are too big to fail are close to collapse.

COMPANY PROFILE

MUTHOOT FINANCE LTD.

Muthoot Finance Ltd. is the largest player in the gold loan business in India. 76% of its business
is generated from the 5 southern states in the Country. The Company has a market share of
19.5% in the organized sector as on FY10. It is facing major legal hurdle related to Kerala State
Money lender Act which, if implemented will substantially reduce the profitability of the
Company as Kerala accounts to 24% of Companys business. Moreover, there is a good
probability for gold price to get corrected after this prolonged bull run which may reduce the
ticket size of the loans, leading to a drop in growth and associated profitability. We are quite
bullish on the growth potential of this firm but we would like to avoid the scrip until the
abovementioned factors are sorted out and the scrip is available at a deep discount.

INTRODUCTION OF THE MUTHOOT FINANCE LTD

Incorporated in 1997, Muthoot Finance Ltd. is Indias largest gold loan Company. It is a
subsidiary of Muthoot Group which is headquartered at Kochi, India. It provides personal and
business loans secured by gold jewellery, or Gold Loans, primarily to individuals who possess
gold jewellery but could not access formal credit within a reasonable time, or to whom credit
may not be available at all, to meet unanticipated or other short-term liquidity requirements. It
has the largest branch network among gold loan providers in India with 1921 branches and a
strong presence in the underserved rural and semi-urban markets. In 2010, it received a fund
infusion of Rs.250 cr. from MUTHOOT FINANCE LTD private equity players like Baring India
Private Equity, Matrix Partners India, Kotak India Private Equity Fund and well come Trust for a

6% stake in the Company. In 2011, well comes Trust picked up an additional 1% stake from the
promoters, taking the total stake of private equity investors to 7%.

HISTORY - MUTHOOT FINANCE LTD

Our Company was originally incorporated as a private limited company on March 14, 1997 with
the name The Muthoot Finance Private Limited under the Companies Act. Subsequently, by
fresh certificate of incorporation dated May 16, 2007, our name was changed to Muthoot
Finance Private Limited. The Company was converted into a public limited company on
November 18, 2008 with the name Muthoot Finance Limited and received a fresh certificate of
incorporation consequent upon change in status on December 02, 2008 from the RoC.
Merger with Muthoot Enterprises Private Limited Our Company, along with Muthoot Enterprises
Private Limited, filed a composite scheme of arrangement bearing C.P. Nos. 48 and 50 of 2004
under the Companies Act before the High Court of Kerala (Scheme of Amalgamation). The
Scheme of Amalgamation was approved by the board of directors of our Company through the
board resolution dated April 28, 2004.
Pursuant to the approval of the Scheme of Amalgamation by the High Court of Kerala by an
order dated January 31, 2005, Muthoot Enterprises Private Limited was merged with our
Company, with effect from March 22, 2005 and the High Court of Kerala had instructed all the
parties to comply with the statutory and other legal requirements to make the Scheme of
Amalgamation effective.

The company on March 22, 2005 filed a certified copy of the order of the High Court of Kerala
with the RoC. With the successful implementation of the Scheme of Amalgamation, the
undertaking of Muthoot Enterprises Private Limited along with its assets and liabilities was
transferred to and vested in our Company.

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KEY EVENTS, MILESTONES AND ACHIEVEMENTS YEAR

1. 2001 RBI license obtained to function as an NBFC.
2. 2004 Obtained highest rating of F1 from Fitch Ratings for short term debt of Rs. 200 million.
3. 2005 Retail loan and debenture portfolio of the Company exceeds Rs. 500 million. 4. Merger
of Muthoot Enterprises Private Limited with the Company
5. 2006 F1 rating obtained from Fitch Ratings affirmed with an enhanced short term debt of Rs.
400 million.
6. 2007 Retail loan portfolio of the Company crosses Rs. 10 billion.
7. RBI accords status of Systemically Important ND-NBFC.
8. Branch network of the Company crosses 500 branches.
9. Net owned funds of the Company crosses Rs. 1 billion.
10. 2008 Net owned funds of the Company crosses Rs. 2 billion.
11. Retail loan and debenture portfolio crosses Rs. 20 billion and Rs. 10 billion respectively. 12.
F1 rating obtained from Fitch Ratings affirmed with an enhanced short term debt of Rs. 800
million.
13. Overall credit limits from lending banks crosses Rs. 5 billion.
14. Conversion of the Company into a public limited company.
15. Fresh RBI license obtained to function as an NBFC without accepting public deposits,
consequent to change in name.
16. 2009 Retail loan and debenture portfolio crosses Rs. 30 billion and Rs. 15 billion
respectively.
17. Net owned funds of the Company crosses Rs. 3 billion.
18. Gross annual income crosses Rs. 5 billion.

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19. Overall credit limits from lending banks crosses Rs. 10 billion.
20. 2010 Retail loan and debenture portfolio crosses Rs. 50 billion and Rs. 20 billion
respectively.
21. Net owned funds of the Company crosses Rs. 4 billion.
22. Overall credit limits from lending banks crosses Rs. 20 billion.
23. ICRA assigns A1+ rating for short term debt of Rs. 2 billion.
24. CRISIL assigns P1+ rating for short term debt of Rs. 4 billion.
25. Branch network of the Company crosses 1,000 branches.
26. Demerger of the FM radio business into Muthoot Broadcasting Private Limited.
27. Private equity investment of an aggregate of Rs. 1,575.45 million from Matrix Partners India
Investments, LLC and Baring India Private Equity Fund III Limited.

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BACKGROUND - MUTHOOT FINANCE LTD

Muthoot finance is a flagship company of the Muthoot Group based in Southern India. The
group has a presence in diverse businesses including financing, healthcare, real estate, education,
hospitality, forex, wealth management services, money transfer services, power generation and
entertainment.
Muthoot Finance Ltd (MFL), incorporated in 1997, is the Kerala based largest gold financing
company in India in terms of loan portfolio. The company offers gold loan to individuals like
small businessmen, vendors, traders, and salaried individuals who cannot access formal credit for
reasons like lack of credit history, documentation, accessibility. The company generally gives
small ticket loans (average ticket size of ~`31000) with a tenor not exceeding one year, thereby
limiting interest risk and asset-quality concerns. The loan-to-value varies from 60%-85%.
Muthoot Finance Gold Loan portfolio as of November 30, 2010 comprised approximately 4.1
mn loan accounts in India which it serviced through 2263 branches across 20 states. The
company has further increased its branch network to 2611 branches as of February 28, 2011,
servicing an average of 67,953 customers per day in the month of February 2011. As of February
28, 2011, the company has employed 15,664 persons. Other then Gold Loans business, the
company provides money transfer services through their branches as sub-agents of various
registered money transfer agencies.

13

PRODUCT AND SERVICES OF THE MUTHOOT FINANCE

1. GOLD LOAN

Muthoot Finance, Indias largest gold loan company is the first choice of Indians who want to
make their dream a reality. May the dream be to start their own business or to buy their own
home, for over 124 years Muthoot Finance has helped almost every Indians dream come true.
Trusted by over 70000 customers every day, Muthoot Finance Gold Loan has services and
products that fit the need of any customer, making it the quickest, most convenient and safest
way to take a gold loan.
Key features of Gold Loan:
Loan disbursal in 5 minutes
Loans starts from 1,500 to 1 Crore
Minimal documentation and credit assessment requirements
High quality customer service in short response time
Evaluation of gold ornaments takes place in house.
Safety of Gold Ornaments: All branches as equipped with Strong Rooms for keeping safe
custody of Gold Ornaments
Gold Loan available at over 3,000 Muthoot Finance branches across India
0% processing fees
Pre-payment option-without any penalty

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GOLD LOAN SCHEMES

Rs. 2,155/Scheme Name

Value (per gram)

Interest (% p.a.)

True Value Personal Loan (TPL)

Rs. 1,035/-

12%

Super Value Personal Loan (SPL)

Rs. 2,260/-

24%

Real Value Personal Loan (RPL)

Rs 1,960/-

18%

Express Personal Loan (XPL)

Rs. 2,090/-

21%

2. GOLD COINS
Now invest your wealth in the ever rising power of Gold with the Muthoot Precious Metals
Corporation. 24 carat Pure Gold Coins: Muthoot Precious Metals Corporation presents Gold
Coins with 999% purity (24 Carat). Invest in safe, secure and profitable Gold Coins.
The Gold Coins hold many advantages:
999% pure
Finance schemes with easy monthly installments
Appreciating asset
Higher return on investment with no risks
Available in denominations such as 2g, 4g, 8g, 20g and 50g to suit every pocket.
The ideal gift for your near and dear ones

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Silver Coins
999% pure Silver Coins
One of India's few financial players that deals in Silver Coins
Available in 50 gm and 100 gm
Available at over3, 000 Muthoot Finance brances across India

3. MONEY TRANSFER

One of the finest Money Transfer services in India, with over 700,000 transfers annually,
Muthoot Money Transfer is the largest payout centre in India. Muthoot Money Transfer allows
real time money transfers from across the seas, with the money reaching the receiver in less than
10 minutes. The money can be transferred from First Remit/Coinstar, Xpress Money, Ez Remit,
Money Gram, Royar Money, Global Money Transfer, Western Union, Transfast, Instant Cash and
even Muthoot Finances own branches abroad. The service boasts low costs, high exchange rates
and NO additional service charge to the receiver.
The key highlights of this service are:
Fastest Money Transfer facility
No bank account needed for amounts up to Rs. 50,000
The receiver does not have to pay any service charge
Certified by the RBI
Access it in any of the 3000 branches across the country

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4. FOREIGN EXCHANGE

Muthoot Foreign Exchange offers you currency exchange facilities as well as allows you to buy
and sell foreign currency and Travellers cheques with Muthoot Foreign Exchange service. With
the wide network of almost 3000 branches, we ensure ease of transaction. Muthoot Foreign
Exchange helps you get competitive rates for all currencies and notes in 35 major currencies as
well as 100 miscellaneous ones!
A few features of our Foreign Exchange service:
Buying and selling of all major Travellers cheques and Travel Cards
Commission free encashment of Travellers cheques
Competitive rates for all currencies
Remittance of funds abroad for various purposes

5. MPOWER CARD

Your life is made infinitely easier with the Muthoot MPower Card, which is a unique identity
card with numerous benefits:
Access it anywhere in India
Earn Loyalty Points on every transaction at ANY Muthoot branch
Redeem these Loyalty Points for attractive gifts
Get Rs. 20 per gram extra on Gold Loan
Keep all your jewelry in our lockers free of cost (No locker charges!)
Rs. 50,000 Personal Accident Insurance coverage

17

 Deposit and withdraw money from any branch on Real Time

Special overdraft scheme for MPower Cardholders.

6. TRAVEL SMART

Within just a few months of its launch Muthoot Travel smart has already become one of the
leading IATA (International Air Transport Association) accredited agencies and has got certified
by IRCTC. Muthoot Travel smart offers all the services of a travel agency and more, such as
travel insurance and foreign exchange Muthoot Travel smart carries forward the groups core
values of helping India make the right decision with their money by helping you during your
travels, both familial and official. In addition to the 3000 branches of Muthoot Finance in India,
the services of Muthoot Travel smart can be accessed in 6 offices overseas as well.
The services offered under Travel smart include:
International & Domestic Ticketing
Railway Ticketing
Tours
Passport, Emigration & Visa
Travel Insurance

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VALUE ADDITION IN PRODUCT AND SERVICES OF THE MUTHOOT FINANCE

LTD
We have challenged ourselves to perform better than the best. We have now launched a new
venture in Gold Financing, offering Customers loan against the security of Gold Exchange
Traded Funds (ETFs) units. This will not only add value to the services but also enable the
Company to service financial requirements of new Customer segment.
The visionary zeal, constant innovation and customer-oriented product & service delivery
deployed at every phase of its growth are indeed exemplary. And Muthoot Group is now all set to
go places, backed by its assets built by extraordinary people and high values.
With the guiding principles of honesty, sincerity, confidence and service, Muthoot Group has
indeed come a long way. These values continue to drive all business decisions of the Group
Companies. With customer-centric products and services to offer, the Group has been constantly
innovating and evolving to deliver superior products, transparent workplace practices, easy
accessibility and personalized services at all levels. Perhaps why, Muthoot Group has earned the
trust of millions of customers and associates across the country.
1. Muthoot Finance launches new gold loan scheme
Indian non-banking finance company (NBFC) Muthoot Finance Ltd Friday announced the
launch of a new gold loan scheme that will provide loans to public against the security of Gold
Exchange Traded Fund (ETF) across the country.
The new scheme Gold ETF Loan Scheme which will be made available to the customers by
July-end 2011 will help customers get loan against their Gold ETF units to the extent of 85% of
the net asset value (NAV) of ETFs, said a press release issued by Muthoot Finance.
Gold ETFs are mutual fund units issued by Asset Management Companies against 995 purity
physical gold. They are listed and traded on stock exchanges and can be bought and sold like
stocks on a real-time basis. Gold ETFs were valued at Rs 50 billion as of June 2011.
Loan against Gold ETF is a scheme through which Muthoot Finance plans to venture into
totally new segment of gold financing which would not only add value but also enable the

19

company to service the financial requirements of newer customer segments, said George
Alexander Muthoot, managing director of Muthoot Finance during the launch.

2.

MUTHOOT

FINANCE

LAUNCHES

THE

WESTERN

UNION

MONEY

TRANSFERSM SERVICE:

May 27, 2011, Kochi, India: International money transfer consumers across Kerala - Indias
foremost remittance driven economy will now be able to receive their Western Union Money
TransferSM transactions from Muthoot Finance - a leading Kerala based financial institution.
Muthoot Finance will now offer Western Union Money Transfer services from its countrywide
network of 2800 locations linking them to Western Unions network of more than 400,000
locations in over 200 countries and territories across the world.
Launching the service, Mr George Alexander Muthoot Managing Director, Muthoot Finance
Ltd said, Here, on this occasion, three of the biggest players of the Indian Financial Services
industry have come together with the intention of providing a premium money transfer service to
customers across the country.
Muthoot Finance Ltd., through its extensive network of branches, aims to capitalize the huge
potential of the money transfer business in India.
With its expansive global network, Western Union is uniquely positioned to deliver fast, reliable
and convenient money transfer services to consumers across remote geographical locations
globally.
Through our agreement with Western Union we have facilitated a number of classes of trade
including retail and banks to offer Western Union Money TransferSM services to the remotest
corners of India. The collaboration with Muthoot Finance is one more step in this direction
which would positively impact people across the 2,800 branches offering the service,

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Manappuram Finance Ltd

Manappuram Finance Ltd (BSE: 531213) or MAFIL is a non-banking financial company

(NBFCs) situated in Valapad, Thrissur, Kerala state. Manappuram has over 3200+ branches
across 25 states, a staff strength of over 15,000+ people.
History
The company was founded in 1949 by late V.C. Padmanabhan in Thrissur District. The company
commenced its operations at Valapad, mainly with money lending activity on a very modest
scale. The group's flag-ship company, MAGFIL, was established in 1992 in the wake of
economic reforms launched by the Government of India. Manappuram's origins go back to 1949
when it was founded in Valapad (a coastal village in the Thrissur District of Kerala) by the late
V.C. Padmanabhan, father of Nandakumar. Its activity was mainly pawn broking and money
lending carried out on a modest scale.
The expansion
Shri Nandakumar took over the reins of this one Branch business in the year 1986 when his
father expired. Since then, it has been a story of unparalleled growth, with new milestones being
crossed every year. Manappuram Finance Ltd. was incorporated in 1992 (the original name was
Manappuram General Finance and Leasing Limited) with its registered office at Valapad, in the
Thrissur District of Kerala. It is India's first listed and highest credit rated gold loan company and
widely recognised as a leading wealth creator in the Indian stock market. Since inception, the
Company has maintained a consistently rapid pace of growth. Today, it has around 3000
branches across 26 states and UTs with Assets under Management (AUM) of about Rs.11,600
crores, a workforce of about 22,000 and a live customer base of 16 lakhs (Data as of 31 March,
2012).
Soon after it commenced its operations, Manappuram Finance Limited gathered several "firsts"
to its credit. The company was the First NBFC in Kerala to receive a Certificate of Registration

21

issued by the RBI. It was the first Kerala based NBFC to get a Credit Rating in 1995 of "MA"
(current rating MA+) from ICRA, recognising the company's ability to make timely repayments
of the principal and interest under its then existing public deposits programme. Manappuram
Finance was one of the very first NBFCs from Kerala to go for a Public Issue of its shares in
1995. In fact, the company has been consistently making profits and consistently paying
dividends from the very first full year of operations.
The company was also the first NBFC from Kerala to issue bonus shares in the ratio of 1:1 in
2007 and then, repeat the feat twice, in 2010 and in 2011 (making it three such instances in five
years). Moreover, in 2007, Manappuram Finance Ltd became the first Kerala based NBFC to
receive foreign Investment from FIIs, and also get the highest short term credit rating of A1+
from ICRA. In 2010, it became the very first Kerala-based company to offer ESOPs (Employee
Stock Option Plan) to its middle and senior management functionaries. In April 2011, it became
only the second listed company from Kerala to have its shares traded in the "A-Group" at the
Bombay stock exchange.
Other activities
As part of its diversification, Manappuram Finance Limited has also ventured into the Foreign
Exchange business with the Reserve Bank of India having granted an Authorised Dealer - II
licence to the Company which permits it to effect outward remittances for a variety of purposes
such as overseas medical treatment, higher education abroad, business travel, conferences etc.
The Company has also commenced Instant Money Transfer in collaboration with UAE Xchange,
Wallstreet and MoneyGram.

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Management Team
Mr. Jagdish R. Capoor, Non-Executive Chairman
Mr. Jagdish R. Capoor is a former Deputy Governor of Reserve Bank of India. He has been the
Chairman of Agricultural Finance Corporation Ltd and Assets Care Enterprise Ltd; Chairman of
HDFC Bank, Chairman of BSE Ltd, Chairman of Deposit Insurance and Credit Guarantee
Corporation, Chairman of Bharatiya Reserve Bank Note Mudran Ltd, Additional Director of
Entegra, Director of The Indian Hotels Company Limited, Director of Vikas GlobalOne Limited,
Director of Agricultural Finance Corporation, and Assets Care Enterprise Limited. He also
serves on the Boards of the LIC Pension Fund Ltd., Quantum Trustee Co. Pvt. Ltd, LIC Housing
Finance Ltd. He is on the Board of Governors of Indian Institute of Management Indore. Jagdish
Capoor has been a Director of Manappuram Finance Ltd. since July 20, 2010.
V.P. Nandakumar, Managing Director & CEO
Mr. V.P. Nandakumar is a post graduate in science with additional qualifications in Banking &
Foreign Trade. Immediately after completion of his education, he joined the erstwhile Nedungadi
Bank Limited. In 1986, after 10 years of service as an officer of the Nedungadi Bank, he
resigned from the Bank to take over the family business, upon the demise of his father, and the
founder of Manappuram Mr. V.C. Padmanabhan.
Mr. I. Unnikrishnan, Executive Director & Deputy CEO
Mr. I. Unnikrishnan is a Chartered Accountant from Thrissur.
Mr. B.N. Raveendrababu, Executive Director
Mr. B.N. Raveendra Babu, is a Post Graduate in Commerce with additional qualification in
Management Accounting from the U.K. Prior to joining Manappuram Group, Mr. Raveendra
Babu occupied senior positions in Finance and Accounts in various organizations in the Middle
East.
Mr. A.R. Sankaranarayanan IRS (Retd)

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Mr. A.R. Sankaranarayanan is an IRS (Retired). He has adorned several important positions in
and outside the Govt such as MD, SAIL International Ltd, Director of Prime Minister`s
Secretariate and former Director of Federal Bank Ltd. At present he is the General Manager of
Kottakkal Arya Vaidya Sala.

Mr. P. Manomohanan
Mr. Manomohanan is a Central Banker with a professional qualification in Banking. He has got
over 38 years of experience in Banking including Directorships in the South Indian Bank Ltd and
the Federal Bank Ltd. He retired as the General Manager, Reserve Bank of India, Department of
Banking Supervision, Trivandrum.
On Feb 7, 2012, the Reserve Bank of India (RBI) has issued a warning to the general public
against placing deposits with Manappuram Finance or a group company. The central bank has
said that acceptance of deposits either by Manappuram Finance or by Manappuram Agro Farms
(MAGRO ) is punishable with imprisonment. Shares of the company plunged 20% following this
news.
On Feb 14, 2012, The company announced an immediate compliance to any of RBI's concerns.
To enhance governance and better manage growth to the next level, the Board also decided to
constitute an independent committee under the chairmanship of Mr Jagdish Capoor (former
Deputy Governor of RBI and former Chairman of HDFC Bank). This committee will review
relevant aspects of operations, systems, controls and organizational structure, including Board
composition and effectiveness.

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THEORETICAL BACKGROUND

Gold is a brilliant yellow precious metal that is resistant to air and water corrosion. It is a very
soft and pure metal. Gold is the most malleable and ductile metal found on earth. Thats why it is
expensive and it is alloyed with other metals, usually copper and silver to make it less expensive
and harder, a karat is the unit that measures the purity of gold jewellery or else it is hallmarked
with a three digit number that indicates the parts per thousand of gold. Some countries hallmark
gold with a three digit number that indicates the parts per thousand of gold. The alloyed gold
comes in many colours and may not be bright yellow all the time. It has long been a values
commodity, particularly in India where it is considered auspicious, and had been in use for
centuries in the form of jewellery, coins, bullions, electronics, and dentistry, also for other
medical purposes. Though gold is a highly liquid asset, it wasnt until recently that consumers
leveraged it effectively to meet their liquidity needs.
Lenders provide loans by securing gold assets as collateral. Compared with the rest of the world
in India the gold loan market is big business. Until a decade back, most of the lending was in the
unorganized sector through pawnbrokers and money lenders. However this scenario changed
with the entrance of organized sector players such as banks and non banking finance companies
(NBFCs) which now command more than 25% of the market. The organized
gold loan market has grown at 40% CAGR form 2002 to 2010. NBFCs have been a major
driving force behind this growth given their extensive network. Faster turnaround time, higher
loan to value ratios and the ability to serve non-bankable customers. Of late, banks have
improved their gold loan product features and services.Coupled with comparatively lower
interest rates charges, bank stand to gain market share at the expanses of NBFCs in the near
future.
The eligibility criteria required to apply for gold lone in India includes three factors. Firs-tly, the
person has to be above 18 years of age. Secondly, the person applying or a gold loan in india
should have a ID & address proof and last but not the least the applicant should be working on a
regular salary basis , means there should be a constant flow of income.

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BACKGROUND: GOLD AND THE INDIAN SOCIETY

Gold has traditionally been among the most liquid asset and is an accepted universal currency. it
has traditionally been consumed by individuals in the form of jewellery, especially in India were
it is considered auspicious. Gold is presumed to be a safe haven in times of economic
uncertainty, a fact exemplified by a 30% increases the value of gold over the past year India is
one of the largest market of gold accounting for approximately 10% of the total world gold stock
as of 2010. Rural India accounts for 65% of this gold stock. Though gold price have increased
19% CAGR from 2002 to 2010, gold stock in India has grown at 22% CAGR During the same
period to 18000 tons (Rs.32000 billion). The demand for gold has followed a regional trend with
southern India accounting for 40% of annual demand, followed by the west (25%), north (2025%) and east (10-15%).
Looking for Gold Loan Market
Major Players
The Key Players in the Indian gold loan market include the unorganized sector, banks _
public/private/cooperatives and NBFCs. While the unorganised sector, comprising local
pawnbroker and money leader has traditionally dominated the gold loan market for money
decades and still commands nearly 75% of the market the organized sector led by NBFCs is
catching up fast. The organized sector has grown at a rapid paces of 40% CAGR form the 2002
to 2010 and is expected to grow by 33% to41% CAGR in 2011
And in doing so these companies are challenges the dominance of the large unorganised sector
within the organized sector, NBFCs have grown at a repaid rate from 18.4% in FY to 32.2% in
FY10. (Source: cognizant 20-20 insight jan.2012)

26

Muthoot finance
With a tagline loan in just 5 minutes muthoot fiancs is a Indias largest gold loan company & is
the fast choice of Indian who want to make their dream a reality. May the dream be to start their
own business or to buy their own home: muthoot finance has helped almost every Indians dream
come true, trusted by over 76000 customer every day muthoot finance gold loan has services and
products that fit the need of any customers , making it the quickest ,most convenient and safest
way to take gold loan
Headquartered in the southern Indian state of Kerala, their operating history has evolved over a
period of 72 since M George muthoot (the father of our promoter) founder a gold loan business
in 1939 under the heritage of a treading business established by his father, ninan mathai muthoot
in 1987. since our formation, we have broadened the scale and geographic scope of their retail
leading operation so
that, as of march 31, 2008, 2009, 2010, 2011 and in the period ended September 30, 2011
revenue from their gold loan business constituted 95.97% 96.71% 98.08% 98.75% and 99.01%
respectively , of their total income,

Manappuram
Manappuram group was founded by late Mr. V. C. Padmanabhan many decades ago currently
managed by his son Mr. V. P. Nandakumar, executive chairman of manappuram general finance
& ltd (manappuram or MAGFIL) manappuram, registered as a deposit taking NBFC is the
flagship company of manappuram group
Headquartered in the state of Kerala in southern India is the largest listed gold loan company in
India. Primarily engaged in providing loans against household used jewellery pledged by its
customers. Amongst the safest form of asset lending, with both physical custody and beneficial
ownership with the lender.

27

MUTHOT FINCORP
Muthoot fincorp limited, the flagship company of the Muthoot pappachan group (MGP), is a
finance company that caters to the financial needs of retail and institutional customers. They are
registered with the reserve bank of India as a systemically important non deposit taking non
banking finance company (NBFC) with a paid up capital of Rs 181.25 cores and a net owned
fund of Rs 824.00 corers as on 31. 12. 2011 Muthoot fincorp limited has wide network of over
2200 branches (as on 31/3/2012) and expanding more.

KARVY FINANCE
KARVY, the parent group is one of Indias largest integrated financial services providers with a
25+ year operating history. KARVY covers the entire spectrum of financial services providers
with a stock
broking. Commodities broking / finance registry services depository services merchant banking
& corporate finance IPO distribution investment banking realty services insurance broking /
distribution and distribution of financial products like mutual funds bonds personal finance
advisory services BPO / technology services wealth management and loans KARVY has pan
India personal with over 575 offices in 375 locations across India and overseas at Dubai and
New York and has over 9000 highly qualified staff. Keeping in line with KARVY credo to be a
leading and preferred financial services provider the focus of KARVY finance will be to provide
the complete spectrum of financial services products to their customers and build a strong
nationwide distribution footprint to emerges as the leader in capital markets and retail finance in
India
Their niche lies in the fulfilment of customers financial needs at all stages of their life by making
possible simple and flexible financial solutions tailor made to suit customers requirements

28

INDIA INFOLINE
The MUTHOOT AND MANAPPURAM

(India Info line) group, comprising the holding

company, India Infoline Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of
Indias premier providers of financial services. MUTHOOT AND MANAPPURAM

offers

advice and execution platform for the entire range of financial services covering products
ranging from Equities and derivatives, Commodities, Wealth management, Asset management,
Insurance, Fixed deposits, Loans, Investment Banking, Gold bonds and other small savings
instruments.

Process for availing Gold Loan :

Its a four step process:
Loan Valuation: Banks carries out valuation of Gold & decides on the
loan amount eligibility.
Documentation: Usually banks/NBFC takes photo id & residence proof of the applicant.
Signing of Agreement: Terms & condition of the loan are signed by the loan applicant.
Loan Disbursement: Cheque is handed over to the customer over the counter after signing
agreement at same time.

Loans against gold jewellery grows

The business of loans against gold jewellery has become a priority for many financial
institutions.
Many have chalked out mega retail spread plans, especially in Tier-III and Tier-IV cities, to
ensure more gold loans, especially to farmers. Manappuram General Leasing and Finance and
The Muthoot Group, the leading non-banking finance companies in this sector, have announced
addition of 500-600 new branches by the next year.
Private sector banks, like the countrys largest co-operative one, The Saraswat Co-operative
Bank Ltd (SCB), and HDFC Bank, have plans to intensify facilitation of loan against gold
29

jewellery. SCB is currently giving such loans through 10 retail branches, which it plans to
increase to 100 by the end of 20111-12. HDFC also proposes to increase its footprint in this
segment, on a big scale.
Retail gold loan against jewellery, a small part of our Rs 25,000-crore business, will prosper in
the coming years as we plan to lay more emphasis on this sector. In the next five years, we want
our business (both deposits and advances) to grow to Rs 50,000 crore, with proportionate
increase in the gold loan segment, said Ekanath K Thakur, chairman of SCB, which offers a
gold loan at 13.5 per cent for a one-year period.
Traditionally, farmers mortgage gold to avail money to buy high-yielding seeds during the kharif
and rabi sowing seasons. They repay the loan during harvesting seasons by selling their output.
So, without losing any inherent asset or opportunity to produce high-agri output, they get
additional income through extra yield after borrowing funds from organised and unorganized
financiers.
Kerala-based Manappuram has grown phenomenally in the past two-three years. The loan book
position surged nearly 150 per cent to Rs 6,000 crore this year.
There is enough scope for more and more players in this sector to create awareness about this
short-term loan, in which we offer up to 90 per cent of the value of jewellery, at up to 18 per cent
of interest. We charge no pre-payment penalty. Also, interest is charged only for the period the
loan is availed for. Hence, entry of more players will encourage customers to opt for this shortterm loan without hassles, said V P Nandakumar, chairman of Manappuram, which has 12 per
cent of the market in the overall gold jewellery loan business.
If you consider the estimated 20,000 tonnes of gold held by individuals and 10 per cent of it is
coming for mortgage, then the total loan book position should be Rs 400,000 crore. The industry
has not penetrated even 10 per cent of that. Hence, immense of opportunity lies ahead for new
players, said George Alexander Muthoot, managing director of The Muthoot Group, the market
leader, with nearly 22 per cent share.
Public sector banks have got backing from the government-owned agricultural financing bank,
National Bank for Agriculture and Rural Development (Nabard). They offer an interest rate of

30

7.5-8 per cent. But, customers footprints would depend upon the trust one has built over the
years, Nandakumar said.
HDFC has started gold jewellery loan offered from remote branches. According to Biju Pillai,
executive vice president, the bank considers a variety of factors like the type of ornament and
customer profile for disbursal. Having entered this segment in 2004, HDFC Bank avails a loan
with an interest rate of 10-15 per cent, depending on the loan amount and overall relationship.

Gold loan business in India With demand and price of the yellow metal rising, loan against gold
is also becoming popular. As of FY10, the organized gold loans market in India is estimated at
around Rs 35,000-40,000 crore, registering a growth of 50 % over last year. At this level, the
gold loan portfolio translates into a marginal 1.2 % of the value of total gold stock in India,
indicating that the market is significantly under-penetrated and is expected to continue growing
at the rate of 35-45 %.
According to IMACS gold loan report, as of FY10, the gold loans market is largely concentrated
between two categories of lenders south-based NBFCs specialised in gold loans accounting
for around 32 % of total market and scheduled commercial banks holding another 58 % of the
market. The rest of the gold loans portfolio is constituted by several small co-operative banks.
Why a gold loan
Gold loan as a concept is already popular in the South India through many organised and unorganised lenders. South-based companies are looking to expand beyond South India with branch
expansion and heavy advertisements. South-based gold loan companies like us are expanding
into North India as gold has now become a lifestyle product and most of the Indians buy gold. In
times of need one can get a loan against gold within minutes with minimum formalities, says
Muthoot Pappachan Chairman & Managing Director John Muthoot.
Commodity experts feel that since gold as an asset class earns profit only when sold, it makes
sense to use the metal to take a loan in times of emergency. Gold, unlike equity, does not earn
any dividend. If you do not wish to sell it, but need money urgently, gold loan can be a good
option. One of the best features of a gold loan is that you can get the loan on the same day itself.
31

Also the interest rate you pay on the loan is comparatively lower than a personal loan and
chances of getting the loan are higher.
Comparing personal loan and gold loan, Manappuram Finance Managing Director I.
Unnikrishnan says, in times of emergency you need a loan almost immediately with minimum
documentation, and without any evaluation of your loan repaying capacity and if you have gold
it can be a better option compared to a personal loan where all these factors come into play. A
number of public sector and private banks and non-banking finance companies (NBFCs) are
offering gold loan.

Which lender to approach

Till now gold loans have been a bastion of small-time money lenders and NBFCs. But with
banks looking at expanding the secured loan portfolio as against the unsecured personal loan, the
options for the borrowers are aplenty. Most of the gold loan business are in the unorganized
sector and NBFCs. Experts caution borrowers to make proper inquiry about the pedigree and the
track record of the lending agency before pledging gold for a loan.
Says author of Retire Rich PV Subramanyam, try a public sector bank for taking gold loan as
gold loan is a secured loan. Banks are well regulated, are sound and carry lesser risk compared to
a non-banking finance company. With high emotional value attached to the jewellery you
pledge, its better to opt for a lender which is stable, well diversified and is in the gold loan
business for a long period.

Interest rate & tenure

When was the last time you brought your negotiation skills into play? Its time to use them now
if you are looking for a gold loan. There are various parameters on which the tenure, interest rate
and the level of negotiation would depend like whether the gold is hallmarked or not, the
tenure of the loan amount and what percentage of the value of the gold you would like to borrow.
32

If you have a good quality hallmarked gold and the value of the gold you want to borrow is 60
% or less you may negotiate for lower interest rate from the lender. Typically, the tenure on a
gold loan falls between one year to two year with some lenders even extending loan for three
years. The documents required are residential proof and a recognized photo identity for example
a PAN card, voter Identity card or driving license. The banks may take an hour to a day to extend
the gold loan. On the other hand, NBFCs like Muthoot Finance and Manappuram, going by their
advertisements, extend the loan within minutes. The average rate of interest falls between 11 %
to 14 %. However, some NBFCs are charging a much higher interest rate of 20-24 %.
What are the inherent risks?
Even though the gold loan may seem to be an easy option to borrow money there is a word of
caution from the financial experts who advise that taking a gold loan for buying luxury items or
for consumption purposes may not be a great idea.
Experts hence advise to go for a small loan and for a small tenure. Only if you think you can
repay the loan should you go for the gold loan. Though gold loan lenders fall under the Reserve
Bank of India's supervision, therere experts who doubt whether non-banking finance companies
lending against gold are as strictly regulated as banks. Financial experts advise to take a gold
loan in small sums and make sure that you have enough liquidity to repay the loan and get the
gold back. The gold you have pledged with the lender is usually auctioned 12 months after the
due date of repayment has lapsed.
Gold loans (or gold deposits) may be undertaken to obtain an income return on gold. The gold
that is placed on loan (or deposit) may be either a financial asset (i.e., monetary gold) or a nonfinancial asset (i.e., non-monetary gold.) The gold remains on the books of the gold lender, and
the lender retains the exposure to the market risk arising from movements in the market price of
gold. Loan against Gold Ornaments is a product designed to provide liquidity against gold
ornaments without having to sell them. Gold ornaments lying idle can be put to productive use
by availing Loan against Gold Ornaments. Loan will be sanctioned on submission of all the
required documents and satisfactory assessment of gold ornaments. Loan amount is disbursed by
cash,

DD

or

funds

transfer

to

an

33

account

(as

the

case

may

be).

In the case of default in repayment, penal interest (as the case may be) will be charged around
2% per annum over and above the normal rate of interest
The product is packed with features such as:

Hassle-free quick processing of loans.

Simplified paperwork.

Easy payment options.

Attractive interest rate.

Gold loans (or deposits) are not backed by cash collateral and, in some cases, are not backed by
non-cash collateral. However, the gold may be on-sold by the borrower. With Gold Loan, you
can get an instant loan against your gold jewellery and ornaments. The procedure is simple,
documentation is minimal and approval is quick.
Features & Benefits

You can avail Loan upto Rs.20,00,000 & upto 80% of value for any purpose

Safety & Security of your Gold Jewellery

Loan processed in 30 Minutes

ATL - Anytime Liquidity

No EMI, Service only Interest and enjoy the Loan facility

Lower Interest Rates

Simple documentation and fast processing.

Overdraft limit varies depending on the market rate of gold.

34

What is a Loan against Gold?

The majority of us have some gold whether this is in the form of jewellery or pure other
ornaments of gold (including coins). You can use this gold as a security to avail a loan very
quickly, from specialist lenders and banks.

How does it Work?

You can either apply online or go to your nearest gold loans branch, and your gold items will be
valued. You will then be able to avail a loan based on the value of your gold items. The gold
jewellery or ornaments must belong to you or someone in your family.
Because you are providing security, the lender will not need a long time to consider your
application. Usually you will gain approval for the loan very quickly.

What are the Loan Tenures?

Most loans against gold are between 6 months and a year, but the tenures may vary according to
the lender or bank you use. Some gold loans are a minimum of 1 year, and up to 6 years just
make sure you remember to check when you carry out your loan search and comparison.

Are there any Fees?

There may be fees on a gold loan, such as processing fees or administration fees. Make sure you
enquire about these in advance, so that you can plan them into your budget.

35

What Happens if I Cannot Repay the Loan?

Because you are using your gold jewellery or ornaments as a security on this loan, you risk
losing them if you are unable to keep up with the loan repayments.

This could be difficult because many items of jewellery carry personal or sentimental value.
Therefore, remember to plan your loan very carefully into your everyday life and ask yourself if
you will be able to afford the EMIs over the full tenure of the loan.
Am I Eligible?
To get a gold loan, you must prove your ID, you may need to have a minimum age (though this
may vary according to the lender) and you will need to prove your address / residence.
The criteria of what kind of borrowers may apply do vary according to lender / bank, so check
this in advance as well. You may need to prove that you are salaried or professional but some
lenders can take on borrowers who are not as financially secure.

36

GLOBAL SCENARIO
Loan against gold are traditionally considered taboo in households. Even when gold is pledged it
is still done as the last resort. Gold jewellery at home is considered on par with goddess lakshmi
and hence hedging gold for a loan is considered inappropriate.
Gold loan market this perception towards gold loan has gradually undergone a change and
individuals have started seeing the value of loan against gold as against availing a personal loan
the gold loan market that was highly fragmented and dominated by local jewellers, has gradually
seen the entry and growth of NBFCs and banks a clear indication of the viability of gold loans as
an important loan product.
The gold loans market has recently seen a lot of action firm both the consumers and the industry.
With gold spiralling upwards borrowers are able to get decent valuation for their gold and the
process of getting such a secured loan is also largely hassle free the southern Indian markets have
been particularly lucrative for the gold loan business -85%-90% of the gold loan market is in the
states of Andhra Pradesh, Tamil nadu and Kerala.
According to an estimation of the ICRA management consulting services (IMACS) the organized
gold loan market in India stands at $8 billion and is growing at a compound annual growth rate
(CAGER) of 40% since 2002 there is still ample potential in this segment and with more
banks /NBFCs coming into this business, there could be considerable growth in terms of volume.

37

Why NBFCs are growing

By virtue of their business model, NBFCs have grown rapidly over the last few years as
evidenced by their increase in market share. The key differentiators for the NBFCs as compared
to the banks and cooperatives are.
Quick loan approvals and disbursals, with minimal documentation
Multitude of loan options with higher LTVs.
Greater accessibility due to better penetration.
Better operating cost structure visa-a-vies banks.
Flexibility provision of very small and very large loan amounts.

Regulatory environment
While there are no means of controlling the unorganized sector the organized sector of banks and
NBFCs come under the purview of the reserve banks of India (RBI) which has norms to regulate
the gold loan market. NBFCs had been traditionally disbursing gold loans through funds received
from banks under priority lending for the agricultural sector. The loans under this category enjoy
an interest rate discount of approximately 200 bps over the normal interest rates charged by
banks. But to reduce the risk in the system the RBI ruled in February 2011 that bank credit to
NBFCs for lending against gold jewellery will not be treated as exposure to the agricultural
sector. The resulting higher interest rate for funds is expected to promote better lending practices
by NBFCs to creditworthy borrowers. With the continued rapid growth of the gold loan market
in India RBI has started examining lenders especially NBFCs for possible concentration risks
(i.e. risks due to a sharp decline in the prices of gold for a lender with a large exposure to gold
assets pledged against the loans.)
All lenders are required to adhere to the KYC norms. NBFCs allegedly have not strictly followed
this regulation and hence have been under the RBI s scanner for some time now. Currently
38

NBFCs gold loan are regulated by RBI. However, some state governments require compliance
with relevant state money lending statutes .if the state governments succeed in enforcing this
regulation the profit margin of NBFCs would be further squeezed. There have been recent
complaints regarding high interest rates and penalty rates charged by NBFCs. this has caught the
attention of regulators any regulatory move in this regard would impact the profit margin of
NBFCs.

Impact analysis: RBIS gold loan regulation for NBFCs

In its latest move, RBI has come up with a norm for NBFCs that does not allow them to offer a
loan above 60% of the value of gold.
Why it is a setback for NBFCs?
RBIs guideline is a setback for NBFCs because the new rules require greater capital adequacy
for the financing companies and the thresh hold for the value of loan against gold is proposed to
be at a lower value. This would mean that ornaments of the same value are expected to result in a
lesser loan amount and that to at a slightly higher cost.
Check out other aspects where NBFCs could be adversely affected. Earlier NBFCs used to
provide up to 80% loan against the gold now it would be reduced to mere 60% of the gold value.
Gold loans from banks would now become more attractive than NBFCs until they are allowed to
lend more on the value of pledged gold the cost of funding for NBFCs would go up due to the
RBIs restriction to allow the NBFCs to finance its gold loan from the banks as an exposure to
agricultural loan. NBFCs might have to reduce the interest rate to sustain hold in the gold loan
market. Hence the current profit margin would come down significantly.
Whats in favour of NBFCs?
Though this regulation would it hard on the revenue as well as bottom-line of the NBFCs there
still some positive assistive to this move:

39

NBFCs would continue to enjoy the nice segment advantage due to its deep presence in the gold
loan market at present; NBFCs have a 32% share of the total gold loan market. The gold loan
would still be cheaper than the personal loan, so the size of market is set to grow bigger in
coming days.
There are many untapped areas where NBFCs could have a better reach than the banks. The
advantage o f trouble free and quick loan processing by NBFCs would give them the edge over
the banks. NBFCs can raise funds through market borrowings, i.e. Commercial papers to lower
the cost of fund.
.
Why Gold loan is important in present scenario?
I think below chart is very helpful to understand the importance of gold loan in present
scenario.
BASIS
Loan amount
Mode
Rate of interest
Lock in period
Flexibility
Documentation

GOLD LOAN
No limit Rs 5000/-onward
Cash loan
11.40 to 26.40% based on loan amount
No lock in period
Totally flexible pre- closure and part closure
Address proof Photo IDPDC Driver license

PERSON
Min. Am
By A/c p
Ranges b
Ranges b
Very less
ITR form

Pre-payment
Hidden charges
Customer profile

Possible without penalty

No hidden charges even CWT is borne by the company
Loan is provided to all customer

record.
Usually
Quite ma
Only to p

eligibility
Service charges
Interest on part

No service charges
Interest charges only on the outstanding amount

2 to 8%
On the e

payment
Penalties
Personalize attention

No penalties on part and fore closure

Heavy p
Prompt and personalized attention is given to the each and every DMAs a

Revolving credit

customer
bank.
Available as principle gets revolved on payment of interest every 3 Loan has
months
40

Verification
Minimum salary criteria
Time duration
Secrecy

No field verification
No such criteria
10 15 days
Absolute secrecy is maintained

LITERATURE REVIEW

The research project is to study of MUTHOOT FINANCE LTD and MANAPPURAM

FINANCE LTD gold loan in Nagpur city
kejriwalarun (2012) in his article riches to rags story of the gold loan industry in
business standard remarked that the reason people go to GLCS is the next -to-nil tome
they take in disbursing loans. Typically, GLCS lend up to 80% of the value of gold, making
customers a happy lot. However, last Month, the reserve bank of INDIA (RBI) reduced the
loan-to-value for GLCS to 60% of the gold content.
Bureau (2012) in his article gold loan firms setting up SRO as RBI tightens screws in
economic times concluded that under the lens of the reserves bank , leading gold finance
companies have decided to form a self- regulatory organization (SRO) which will frame fair
business practices code for the industry
John navin (2012) in his article and the RBI on Leander in business world remarked that
,the stock market did not follow the centre banks restrictions on the lone size of gold NBFCs to
41

Field ver
Monthly
15 minut
No secre

60% of the loan to value (LTV) view. The share price of Muthoot finance and Manappuram
finance, the largest and second player, fall 11.35% and 6.1% respectively, on 22 March, a day
after the RBI announcement.
Bureau (2012) in his article RBI move on gold loan will trim companies margins in
economic times remarked the gold loan financing companies on Thursday welcomes the latest
measures by the reserve bank, saying they will strengthen the industry, but analysts pointed out
that the clampdown will erode the margins of these companies and curtail growth
Jayakumar john (2011) in his article lure of the yellow metal in business world remarked
the gold loan industry has recorded growth of 35% over the past three year and explains how
various gold loan companies rises and reach the top positions
Bureau (2011) in his article should you invest in NCD of gold loan Finances Company in
economic times concluded that with that we come to another important aspect of debt
investing risk. PUS bonds like those of NHAI, PFC enjoy AAA rating, while muthoot finance
enjoys a crisil AA rating. Manappuram finance has a CARE AA- rating
Regoanil (2010) in his article gold loan: making gold work for you in business world
remarked that this perception toward gold loan has gradually undergone a change and
individuals have started seeing the value of loan against gold as against availing a personal loan.
The gold loan market that was highly fragmented and dominated by local jewellers has gradually
seen the entry and growth of NBFCs and bank, a clear indication of the viability of gold loans as
an important loan product.
Jain T.R. and Aggarwal, Dr S.C., statistics for M.B.A. 2nd edition, VK publication
Malhorta Naresh k and Dash satybhushan, marketing research (6th edition) Pearson
publication.
Kothari C.R., research methodology methods & techniques 2nd edition wishwa
prakashan, daryaganj, New Delhi, chapter 4. Page 55-58. Chapter
Method of data collocation, collection of data through questionnaire, collection secondary data
are referred before the data collocation form from this book

42

OBJECTIVES

In this project, the primary objective is to the consumer awareness regarding gold loan
To find out the competitive positions of MUTHOOT FINANCE LTD and Manappuram
Finance Ltd gold loan in Nagpur city.
Increases the relationship between Muthoot and Manappuram & other company
consumer.
To find out the most preferred channel.
To find out what should do to boost Muthoot and Manappuram finance limited.

43

SCOPE
For borrowers, gold loans have emerged as one of the best means of raising quick, short-term
capital. For lenders, gold loans are more advantageous compared with home and car loans
because of the shorter tenures, lower processing time and cost, and greater returns due to higher
interest rates. These factors, along with appreciation in value of gold, have led to an explosion in
the gold loan market. With everyone wanting a piece of this action, the organized sector is
challenging the large unorganized gold loan market dominated by pawnbrokers and
moneylenders, with NBFCs leading the pack due to simpler approval and disbursal processes,
flexible products and better accessibility.
An examination of these trends makes clear that banks/NBFCs that arent yet into the gold loan
market might find it attractive. This is due to the following factors:
Better ROI due to lower cost, higher interest rates and strong collateral.
Ability to compensate for lower off-take of car/ home loans.
Scope for cross-sell opportunities in future including other gold-based products.

44

 Opportunity to capture the growing under-served and under-penetrated market.

With approximately 65% of the market in rural areas, firms need to develop strategies to target
this segment effectively and provide better accessibility to borrowers. When expanding, firms
need to ensure consonance of services and operations throughout the network.
Firms need to manage risks related to possible sharp fall in gold prices and non-adherence of
regulatory norms and also need to ensure that physical assets are properly valued, stored and
documented. Firms need to invest in technology to better manage the increasing volumes and to
reduce risks.

HYPOTHESIS

The following hypothesis is formulated to achieve the objective of the present study:

Muthoot Group and Manappuram Finance Ltd is a leading bank in Indian banking
industry.
Customers are satisfied with the services provided by the bank.
There are minimum formalities for the loan application.

45

RESEARCH METHOEOLOGY

Research methodology is a way to systematically solve the problem. It may be understood has a
science of studying how research is done scientifically.
This of research methodology is that it helps in identifying the problem, collecting, analyzing the
required information data and providing an alternative solution to the problem .It also helps in
collecting the vital information that is required by the top management to assist them for the
better decision making both day to day decision and critical ones. Report is based on primary as
well secondary data, however primary data collection was given more importance since it is
overhearing
Meaning of research

46

Research is defined as a scientific & systematic search for pertinent information on a specific
topic research is an art of scientific investigation. Research is a systemized effort to gain new
knowledge. It is a careful inquiry especially through search for new facts in any branch of
knowledge. The research for knowledge through objective and systematic method of solution to
a problem is a research
Research design
Research design is the conceptual structure within. Which research is conducted; it constitutes
the blueprint for the collection, measurement and analysis of data.
As search the design includes an outline of what the researcher will do from writing hypothesis
and its operational implication to the final analysis of data
Research design can be three types
Exploratory research design
Descriptive research design
Experimental research design
The present study is descriptive in nature, as it seeks to discover ideas and insight to bring out
new relationship. For fulfilling the predefined objectives the descriptive research was conducted.
An Exhaustive market survey of various costumers enough to provide opportunity for
considering different aspects of problem under study
The research objectives, questionnaire was designed.
Data collocation
Two type of data collection primary and secondary
Primary data

47

Primary data refer to the first hand fresh data collected from the field it was collected through the
questionnaire method. Questionnaire will includes MCQ, ranking, checklist, and rating type of
equation
Secondary data
Secondary data refer to the already published information. Secondary data was collected from
various sources magazines, journals, newspaper, internet, government, and industry
Research is based on primary Secondary data. Research has been done by primary data
collection, and primary data has been collected by interacting with various people in Nagpur city.
The secondary data has been collected through various journals and websites.
Out of total 150 questionnaires distributed only 100 questionnaires were received back. The
questionnaires focused on the gold loan, how you know about the gold loan, benefit of gold loan,
why to deal gold loan and the level of satisfaction of the customer.

Data sampling
The target audient for this research includes Nagpur city people. It was also collected through
personal visits to persons, by formal and informal talks and through filling up the questionnaire
prepared. The data has been analyzed by using mathematical/Statistical tool.
Sampling unit:-a decision has to take concerning sampling unit before selecting sample.
Here I have my sample unit includes the people of Nagpur gill road market.
Sample size:- The sample size of my project is limited to 100 people only. Out of which only
86% people had know about the gold loan. Other 14% people did not have known about the gold
loan.

48

 Sampling technique:-the selection of respondents was done on the basis of convenience

sampling. In convincing sampling the samples are being selected on the basis of ease or
convenience. The respondents who are easily approachable will be selected in this project.

DATA INTERPRETATION AND ANALYSIS

1 Are you aware about gold loan?

Option
Response
%

Yes

No
86

14

86%

14%

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Awereness Response

14
Yes
No
86

Analysis: - from the above graph it is clear that 86% of the population are aware about the gold
loan and 14% of the population are not
Interpretation: - from the above graph we can see that majority are aware about the gold loan
and few are not aware about the gold loan.
2 How do you come to know about gold loan?

Option

TV

Respons
e
%

Wall

Direct

Newspape

banner

Friends

Advertisement paintings
48
13

marketing
22

r
5

s
4

relative
8

48%

22%

5%

4%

8%

13%

50

&

Reasons of Awereness

8
48

22
13

TV Advertisement
Wall paintings
Direct marketing
Newspaper
banners
Friends & relative

Analysis:-it is clear from the table that 48% of the aware only because of tv advertisement, 13%
are because of hoardings, 22% are due to direct marketing, 5% are newspaper, 4% are banners
and 8% are due to friends and family.

Interpretation:-from the above graph it is clear that majority of the population are aware only
because of TV advertisement, some are because of direct marketing and very few are because of
banners and newspapers.

51

3 Have you ever deal in gold loan?

Option
Response
%

Yes

No
60

40

60%

40%

52

Gold Loan Deal

40
60

Yes
No

Analysis: - from the above graph we can see that 60% of the population have deal and 40%have
not deal in gold.
Interpretation: - from the above graph we can see that most of the people are dealing in gold
loan and very few are not dealing with gold loan.

4 Do you want to deal in gold loan in future?

Option
Response
%

Yes

No
73

27

73%

27%

53

Future Dealing

27
Yes
No
73

Analysis: - from the above graph it is clear that 73% of people are in a favour of dealing with a
gold loan in future and 27% are not in a favour.
Interpretation: - from the above graph it is clear that most of the population are in favour of
future dealing with MUTHOOT AND MANAPPURAM .And very small are not in favour.

5 With which company you deal or you wish to deal?

Option
Respons
e
%

Muthoot
finance

Muthoot
fincrop

Mannapura
m

Karvy
finance

Future
group

IIFL

Other

29

11

26

12

29%

11%

26%

8%

9%

12%

5%

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Market Percentage

12

5
29

9
8

11
26

Muthoot finance
Muthoot fincrop
Mannapuram
Karvy finance
Future group
IIFL
Other

Analysis:- from the above graph it is clear that 29%of the population dealing with muthoot
finance, 26%are dealing with Mannapuram or wishing to deal with Mannapuram and few are
dealing with karvy, muthoot fincorp, future group

55

Interpretation:- from the above graph it is clear that most of the customer are dealing with
muthoot finance and Mannapuram. And very small are dealing with MUTHOOT AND
MANAPPURAM , Muthoot fincorp, and very few are dealing with future group, karvy.

6 Which of the following is the most preferable thing at the time of availing gold loan?

Option
Response

rate of
interest
70

Maximum per gram

rate
66

customer
Flexibility dealing
40

56

69

Any
other
2

28.3%

26.7%

16.2%

27.9%

0.8%

Preferances

rate of interest

0.8
27.9

28.3

Maximum per gram rate

Flexibility
customer dealing

16.2

Any other

26.7

Analysis:-from the above graph it is clear that 28.3%of the population are preferring only
because of rate of interest ,26.7%are because of max per gram rate,27.9%are because of good
customer dealing because few are flexibility16.2%and vary few are other
Interpretation:- from the above graph it is clear that most of the population are preferring
company only because of rate of interest, some are preferring because of max per gram rate and
good customer dealing, and vary few are flexibility and other

7 Are you satisfied with the current deal?

Option

Yes

57

No

Response
%

39

61

39%

61%

Current Deal

39
61

Yes
No

Analysis: - from the above graph it is clear that 39% of the population are not satisfied with their
current deal and 61% of the population are satisfied
Interpretation: - from the above graph it is clear that most of the population are not satisfied
with their current deal they want to change their current deal and some are satisfied with their
current deal.

8 Which of the following are Main reasons of satisfaction?

58

Option

rate of
interest

Response
%

Maximum rate

Flexibility

customer dealing

48

37

48%

37%

9%

6%

Satisfaction Factor

6
48

37

rate of interest
Maximum rate
Flexibility
customer dealing

Analysis:-from the above graph it is clear that 48%f the population are satisfied only because of
rate of interest 37%are because of max per gram rate6% are because of good customer dealing
9%because few are flexibility and vary few are other
Interpretation: - from the above graph it is clear that most of the person are satisfied with rate
of interest and max per gram rate. Some are due to good customer dealing, and flexibility, and
very few are with others.
9 Do you want to change your loan by any other company?

59

Option

Yes

Response
%

No
75

25

75%

25%

Company Change

25

Yes
No
75

Analysis: - from the above graph it is clear that 75% of the population want to change their
company and 25%of the population do not want to change.
Interpretation: - from the above graph it is clear that most of the population want to change
their company and very few want to remain with the same company.

10 Are you aware about Muthoot and Manappuram ?

60

Option

Yes

Response
%

No
56

44

56%

44%

Muthoot and Manappuram Awareness

44
56

Yes
No

Analysis: - from the above graph it is clear that 56% of the population are aware about the
Mutthot & Manappuram and 44%of the population are not aware about the Mutthot &
Manappuram.
Interpretation: - from the above graph we can see most of the population are aware about the
Mutthot & Manappuram but still the rates of those people are also high who are not aware about
the Mutthot & Manappuram.

11 Have you ever visit in any branch of Mutthot & Manappuram?

61

Option

Yes

Response
%

No
40

60

40%

60%

Branch Visit

40
60

Yes
No

Analysis: - from the above graph it is clear that60% of the population have not visited any
branch of Mutthot & Manappuram gold loan company and 40% have visited.
Interpretation: - from the above graph we can see that majority of the population have not
visited any branch of Mutthot & Manappuram gold Loan Company and few have visited.

62

12 Do you wish to deal with Mutthot & Manappuram?

Option

Yes

Response
%

No
77

23

77%

23%

Mutthot & Manappuram dealing

23
Yes
No
77

Analysis: - from the above graph it is clear that people want to go the Mutthot & Manappuram
because 77% of the population said yes for dealing and very few said no.
Interpretation: - from the above graph it is clear that most of the population want to deal with
Mutthot & Manappuram for the purpose of gold loan and very few are not interested.

63

FINDINGS

It is also clear most of people prefer Mutthot & Manappuram to take the gold loan as
compare to other companies.
Mutthot & Manappuram gold both are providing special schemes which are helpful to
attract customer.
Most of the customers prefer Mutthot gold loan because of good per gram rates.
There are no charges for entry and exit loans.
India info line finances ltd understand the dreams, needs, aspirations, concerns and
resources are unique and this is reflected in every move they do for the sake of individual
customer.
They are treating the customer as their family member and guiding them properly.
It is clear from analysis that most of population are aware about Mutthot as well
Manappuram in term of gold loan.
In Occupation group most of the Investors were Private employees, the second most
Investors were Govt. employees and the least were associated with Agriculture.

64

SUGGESTION

The company has provided proper training to new employees so that they can attract
customers easily.
The company can conduct seminars and workshops so that they can provide information
to the people and give answers to queries.
The company should increases the advertisement regarding the gold loan in national TV.
The company should adopt some strategies to increase the business through existing
customers.
The company should create the awareness about the gold loan among the general public.
They should visit the jewellers. Businessman and other work places so that they can
guide them.
Mutthot should use traditional ways of promotion in rural location. Latest communication
are lacking in Nagpur city

CONCLUSION

65

Most of the companies which are offering gold loan in India are still at growth stage and hence
there are ample of opportunities for all the companies which are offering gold loan to tap
customer. The perception of customer is yet to be changed because still they dont feel
comfortable in taking gold loan because of traditional approach hence there is a lot of education
has to be provided to make people aware of gold loan. To achieve sustainable growth in this
sector Muthoot as well as Manapurram needs to endeavour with maximum efforts the company
can achieve several milestones in future while maintaining the existing customer relationship.
As per the mentioned hypothesis Muthoot and Manappuram both are the non banking financial
corporations. Customers are very much satisfied with the services. You get the gold loan within
few minutes and it required few documents.

LIMITATION OF THE STUDY

66

 Time limit is the major constraint

As the manager are busy in their duty schedule it is not possible for us to spend more
time in interaction and discussion with them
Some difficulty getting the people answer the survey questions because of their workload
and the responsibility they have busy his work
As per company rules many information was not disclosed
Finding &conclusions are based on superficial knowledge
The response given by the respondents may not be 100% accurate and may be biased

BIBLIOGRAPHY
Books
Kothari C.R, Research methodology methods and techniques 2004, new age international pvt.
Ltd, New Delhi edition 2nd pg 56-57

67

Malhotra Naresh and dash Satyabhushan marketing research, 2010 Pearson publication edition
2nd pg 40-48
Luck davidet al marketing research, 2004 prentice hall India, edition 7th pg 53-59
Kejriwalarun (2012): article riches to rags story of the gold loan industry in business standard
Bureau (2012): article gold loan firms setting up SRO as RBI tighten screws in economic
time
johnnevin (2012): article and the RBI on lenders in business world
Jaykumar, jhon (2011): in this article lure of the yellow metal in in business world
Bureau (2012): article should you invest in NCDS of the gold loan finance company in
economic time
Ragoanil (2012) in his article gold loan: making gold work for you in business world
Websites

Websites
www.muthootfinance.com
www.mannapuramgold.com
www.5paisa.com
http://www.business-standard.com/india/news/riches-to-rags-storythe-gold-loanindustary/473351

68

http://www.crindia.com/commodity/gold.html
http://www.moneycontrol.com/master/yourmoney

QUESTIONNAIRE
General Information
NAME..............

69

ADDRESS....................
AGE...........
OCCUPTION.......................................
CONTACT NO....................
EMAIL...............................................
Q.1 Are you aware about gold loan?
A yes

B No

Q.2 How do you come to know about gold loan?

A. TV Advertisement

B. Wall paintings/hoardings

D. Newspaper

E. banners

C. Direct marketing
F. Friends & relatives

Q.3 Have you ever deal in gold loan?

A. yes

B. No

Q.4 Do you want to deal in gold loan in future? (If yes which company)
A. yes

B. No

Q.5 with which company you deal or you wish to deal?

70

A. Muthoot finance

B. Muthoot fincrop

D. Karvy finance

E. Future group

C. Mannapuram
F. IIFL

G. other (specify)
Q.6 which of the following is the most preferable thing at the time of availing gold loan?
A. rate of interest

B. Maximum per gram rate

D. customer dealing

E. Any other (specify)

C. Flexibility

Q.7 Are you satisfied with the current deal?

A. yes

B. No

Q.8 which of the following are main reason of satisfaction

A. rate of interest

B. Maximum rate

C. Flexibility

D. customer dealing

E. Any other (specify)

Q.9 do you want to change your loan by any other company?

A. yes

B. No

Q.10 Are you aware about Muthoot and Manappuram?

A. yes B. No
Q.11 Have you ever visit in any branch of Mutthot & Manappuram?

71

A. yes B. No
Q.12 Do you wish to deal with Mutthot & Manappuram?
A. yes B. No

(Thanks for your kind cooperation)

Signature.............................
Date................................

72