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Comparative study on gold loan

A PROJECT ON
Study on Gold loan in India
A comparative study between Muthoot finance and
Mannappuram finance
Submitted By

Jigar Hanat
T.Y. BBI Sem-V
(2015-2016)

Project Guide
Prof. Meghna Vyas
Affiliated to University of Mumbai
S.K.SOMAIYA COLLEGE OF ARTS, SCIENCE
AND COMMERCE
AUROBINDO, VIDYANAGAR
VIDYAVIHAR [EAST]. MUMBAI-400077

Comparative study on gold loan

ACKNOWLEDGEMENT

I, Jigar Hanat, would take this opportunity to thank the University of Mumbai
for providing me an opportunity to study on a project on Comparative study
On gold loan. This has been a huge learning experience for me.
With great pleasure I take this opportunity to acknowledge people who have
made this project work possible.
First of all I would sincerely like to express my gratitude towards my Project
Guide Prof. Meghna Vyas for having shown so much flexibility, guidance as
Well as supporting me in all possible ways whenever I needed help. I am
thankful for the motivation provided by my Project Guide throughout and
helped me to understand the topic in a very effective and easy manner.
I would also like to thank the Principal Dr. Sangeeta Kohli and other teaching
faculties of the college, my colleagues, Library staff and other people for
providing their help as and when required to complete this project.
I acknowledge my indebtedness and express my great appreciation to all people
behind this work.

Signature of the Student

Comparative study on gold loan

DECLARATION

I, Jigar Hanat, a student of S.K.Somaiya College of Arts, Science and


Commerce in T.Y.B.Com. (Banking & Insurance) in Semester V hereby
declare that I have completed this Project on Banking in ___________________
as per the requirements of University of Mumbai as a part of the curriculum of
B.Com. (Banking & Insurance) course and this project has not been submitted
to any other university or Institute for the award of any degree, diploma etc. The
information is submitted by me is true and original to the best of my knowledge.

Date:

Signature of the Student

Comparative study on gold loan

INDEX
Chptr
No.

Page
Chapter name
No.

Executive summary

Objective ,research methodology and


Limitations of the study

2-5

Section I
Introduction to gold loan and market
1

Fundamentals of banking

History of gold loan

17

Survey of Indian gold market

24

Organisational profile

32

Section II
Research study and data analysis
5

Research study on gold loan

42

Data analysis and interpretation

54

Findings and conclusion

67

Comparative study on gold loan

Bibliography and Webiliography

71

Annexure

72

LIST OF TABLES
Sr
no.

Particulars

Page
no.

Key features of gold loan

14-15

Gold price in india-40 year of history

18

Gold loan portfolio of key market players

27

Feature comparison of gold lender


offering

29

Schemes-Muthoot finance
Schemes-Mannappuram finance
Documents required

Rate of interest

46

Postage charges

47

43-44
45

Comparative study on gold loan

LIST OF FIGURES
Sr no.

Particulars

Page
no.

Value of gold stock(Rs in BN)

26

Organized gold loan market (Rs in BN)

26

Share of organized market players (%)

26

Muthoot organizational structure

38

Mannappuram organizational structure

41

Gold disbursement procedure

48

Aware of gold loan

54

Taken gold loan

56

Gold loan in future

57

10

Company to deal with

58

11

Preferable thing at time of availing gold loan

59

12

Current deal

60

13

Reasons of satisfaction

61

14

Change your loan by other company

62

15

Aware of Muthoot finance

63

16

Aware of Mannappuram finance

64

17

Visited the branch of Muthoot

65

18

Visited the branch of Mannappuram

66

Comparative study on gold loan

EXECUTIVE SUMMARY

Comparative study of gold loan is a very vast topic hence covering each and every concept
isnt possible. The emphasis of this research is on the theory and practice of gold loan offered
by Muthoot finance and mannappuram finance, because of its critical importance in the
modern banking framework.Gold loan is not a new phenomenon; loan against gold activity is
going from many previous years. In this topic we understand the comparison of gold loan
schemes offered by Muthoot finance and mannappuram finance. This project includes the
overall profile of mannappuram finance and Muthoot finance limited, their schemes, and
rates of interest and also the information of Indian gold market and background of society.
The project includes the history of gold loan of both the banks.it consists of all the datas in
part of gold loan offered by both banks. Project also covers the gold loan market of past few
years .The project consists various objectives, limitations and research methodologies
The book is divided into two major sections. Section I of the study - introduction on gold loan
and gold loan market consists of the theoretical research from various articles and websites as
secondary sources. Section II comprises of the actual research study of gold loan with
reference to Muthoot finance and mannappuram finance limited. Research methodologies
were applied for seeking the data related to project viz primary data arrived by forming
questionares,as well as secondary data with help of websites ,books ,document, newspapers
etc.

Comparative study on gold loan


OBJECTIVE OF THE STUDY
Primary objectives
In this project, the primary objective of this study is to compare the gold loan
provided by Muthoot finance and manappuram finance and leasing limited.
The objective is also to create the awareness of gold loan in the market
To analyze the gold loan facility provided by both the companies.
To observe the working of the various departments in relation of the study.
To study the behavioral factor of costumer in choosing the gold loan.
To know the preference of the costumers.
To know the financial position of both companies and costumers preference
towards companies.
To find out the competitive positions of

Muthoot finance and manappuram

finance and leasing limited


To know total no. employees working in gold loan department and the average
salary of the employees working of both companies.
To find out the preference of people for Gold banks or jewelers
To find out the perception of the people regarding loan against gold

Secondary objective
To suggest various factors to improve customer preference, thus increasing the
schemes and lowing the e interest rate of one of the companies.
To find the futuristic scope of gold loan market
To find out the preference of people for Gold banks or jewelers
To find out the perception of the people regarding loan against gold.
2

Comparative study on gold loan


LIMITATIONS OF THE STUDY
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.
People are not always willing to fill questioners in so they throw them always
Some of the sample selected for the study did not respond properly to the
Questionare, however proper care had taken to make the analysis and interpretation
more meaningful.

RESEARCH METHODOLOGY
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

Comparative study on gold loan


Research plan:
PRELIMINARY INVESTIGATION

Direct visit to the company

Discussions with the branch manager

Analyzed about the scope and viability of existing facilities

Secondary data were used to get an overview of two banks.

EXPLORATORY STUDY

Personal interviews with the branch manager and staff.


Questionare were used to understand various factors affecting the gold loan financial
decision

To analysis and interpret the data collected using figures and tables
The last phase of this project is to give suggestion to both Muthoot finance and
manappuram finance and leasing limited.

COLLECTION OF DATA
The success of this study is largely based on the proper collection of the data. The data
collected for this project is by two ways:

PRIMARY DATA:
Data collected directly by the investigator is called primary data. This information is
original and firsthand information. Primary data is collected by various method they are:

Questionare
The primary data was collected mainly by using a Questionare. In study, structured
Questionare consisting of list of questions pertaining to the dichotomous questions to normal
people and to manager.

Comparative study on gold loan


Personal interview.
The personal interview was taken from the manager of both the banks. The Questionare was
prepared to get the primary information about gold loan schemes and various information.

Survey method
Survey method was used to know the customer preference towards gold loan. Questionare
was circulated to the people for knowing the gold loan awareness.

SECONDARY DATA

The collected by the investor from the data already collected from others for some other
purpose are called secondary data. Thus the secondary data is the refined data of secondary
data.it is also called as second hand data because the data is collected by the previous reports
and previous data
In this project the secondary data is collected from various websites, annual reports,
newspaper, articles, journals etc

STATISTICAL TOOLS:
Diagrammatic representation
Diagrams are used to represent the tabulated data diagrammatically as they will give a vivid
picture about the information collected
Simple bar diagram
Multiple bar diagram
Pie diagram
In this particular study the attitudes of a selected sample have been analyzed. There is
a note of relevance to primary data. Since the research objectives can only be
achieved through collecting primary data

Comparative study on gold loan


Chapter 01
Fundamentals of Banking

Introduction and meaning of Banking


Functions of Commercial Banks
Fundamentals of loans
Feature of gold loan
Advantages of gold loan

INTRODUCTION
The term banking is derived from the word banco means a bench. The term banking has
undergone tremendous change over the years. The traditional and commercial banking
activities of accepting deposits and lending has been replaced by the concept of universal
bankig and now international banking. International banking is not a new phenomenon;
international bank activity can be traced back to as early as the 13th century. In this topic we
understand the difference between Indian banking and international. International banking
helps us to know how important international banking for the progress of India and also for
the counter. It i-s one of the most important factors responsible for economic growth of the
nation

DEFINITION:
Banking business: As per Section 5(b) of the Banking Regulation Act, 1949, "banking"
means the accepting, for the purpose of lending or investment, of deposits of money from the
public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or
otherwise.
Banking Company: As per Section 5(c) of the Banking Regulation Act, 1949, any company,
which transacts the Banking business in India, is termed as banking company

Comparative study on gold loan

MEANING:
Banks are intermediaries which accept deposits and lend money to the industrial and
personal borrower. Bank earns spread which is the difference between deposit interest rate
and lending rates. Spread is the recovery of cost and profit. International banking includes all
activities and services that facilitate the movement of goods and services and fund from one
country to another

FUNCTIONS OF COMMERCIAL BANKS


Commercial bank being the financial institution performs diverse types of functions. It
satisfies the financial needs of the sectors such as agriculture, industry, trade, communication,
etc. That means they play very significant role in a process of economic social needs.
Generally the functions of commercial banks are divided into two categories viz. primary
functions and the secondary functions.

Primary Functions of Commercial Banks


Commercial Banks performs various primary functions some of them are given below:

Accepting Deposits: Commercial bank accepts various types of deposits from public
especially from its clients. It includes saving account deposits, recurring account deposits,
fixed deposits, etc. These deposits are payable after a certain time period.
Making Advances: The commercial banks provide loans and advances of various forms. It
includes an overdraft facility, cash credit, bill discounting, etc. They also give demand and
demand and term loans to all types of clients against proper security.
Credit creation: It is most significant function of the commercial banks. While sanctioning a
loan to a customer, a bank does not provide cash to the borrower Instead it opens a deposit
account from where the borrower can withdraw. In other words while sanctioning a loan a
bank automatically creates deposits. This is known as a credit creation from commercial
bank.

Comparative study on gold loan


Secondary Functions of Commercial Banks
Along with the primary functions each commercial bank has to perform several secondary
functions too. It includes many agency functions or general utility functions. The secondary
functions of commercial banks can be divided into agency functions and utility functions.
1. Agency Functions : Various agency functions of commercial banks are:
o To collect and clear cheque, dividends and interest warrant.
o

To make payment of rent, insurance premium, etc.

To deal in foreign exchange transactions.

To purchase and sell securities.

To act as trusty, attorney, correspondent and executor.

To accept tax proceeds and tax returns.

B. General Utility Functions : The general utility functions of the commercial banks
include:
o

To provide safety locker facility to customers.

To provide money transfer facility.

To issue travelers cheque.

To act as referees.

To accept various bills for payment e.g. phone bills, gas bills, water bills, etc.

To provide merchant banking facility.

To provide various cards such as credit cards, debit cards, Smart cards, etc.

FUNDAMENTALS OF LOANS
In finance, a loan is a debt provided by one entity (organization or individual) to another
entity at an interest rate, and evidenced by a note which specifies, among other things, the
principal amount, interest rate, and date of repayment. A loan entails the reallocation of the
subject asset(s) for a period of time, between the lender and the borrower.

Comparative study on gold loan


In a loan, the borrower initially receives or borrows an amount of money, called
the principal, from the lender, and is obligated to pay back or repay an equal amount of
money to the lender at a later time.
The loan is generally provided at a cost, referred to as interest on the debt, which provides an
incentive for the lender to engage in the loan. In a legal loan, each of these obligations and
restrictions is enforced by contract, which can also place the borrower under additional
restrictions known as loan covenants. Although this article focuses on monetary loans, in
practice any material object might be lent.
Acting as a provider of loans is one of the principal tasks for financial institutions. For other
institutions, issuing of debt contracts such as bonds is a typical source of funding. Loan can
be classified as-

Home loans
Home Loans are taken by people for a variety of home-related purposes such as construction
of home, home renovation, home extension, buying of property or land, or payment of stamp
duties. Home loans comprise an adjustable or fixed interest rate and payment terms. Some
types of home loans are mentioned below Home purchase loan
Land purchase loan
Home construction loan
Home extension loan
Home renovation loan
Stamp duty loan
NRI home loan
Loan against property

Personal loans
This type of loan is given to individuals after accessing their credentials based on their
profession or business, or any other sources of income. The loan can be utilised for any
purpose, for example, paying debt, marriage expenses or vacation expenditure. No collateral
security is required for this type of loan. The span of personal loan repayment varies from 12
months to 60 months depending upon the principal amount and the EMIs. The interest rate
ranges from 15
9

Comparative study on gold loan


Percent to 28 percent varying from bank to bank. Approximately 2 percent of the total loan
amount is charged as the loan processing fee. Generally, banks rules prohibit prepayment of
loan for the initial six months ; otherwise 2 percent to 4 percent of the outstanding amount is
charged as the prepayment fees. The EMI starts once the disbursement of loan has been
made.

Business loan
This type of loan is provided to either existing businesses or those venturing into new
business. As banks provide loans on the basis of individual's credentials, it is bit difficult to
get a loan for starting a business. It is very important for individ-uals (starting a business) to
have a clear cut business plan as it is the most important requirement to convince the banks
that your business has the capability of repayment. Banks then rely on individual's
background, assets/property, previous loan history and dedication towards work. Banks also
prefer those individuals who have already insured the property for their business.
For

existing

businesses,

loan

is

provided

in

the

following

ways:

Term loans Amount provided for a fixed tenure at the applicable interest rate: three years
for short term loan and 10-15 years for long term loans.

Bank overdraft limits Ability to withdraw more money than what is deposited.

Bill Discounting Short-term borrowing used to improve a company's working capital and
cash flow position.

Letter of credit for international business Bank guaranteeing of a buyer's payment to a


seller in specified period

Education loan
Required by and provided to students who want to pursue higher education in resident
country or abroad. Students should have an admission offer from an institution before they
apply for an education loan. The loan takes care of the fees of the institution including
examination and library fees; travel expenses for abroad; cost of books and equipment
required; any insurance for the student, if applicable; and any additional expenses such as
tours, thesis, project work, etc. The terms of education loans vary from bank to bank. The
RBI has fixed certain norms on the total amount of loan that can be disbursed; however,

10

Comparative study on gold loan


banks can increase or decrease the limit depending on the institution. For studying in India,
Rs. 10 lakh is the average and for studying abroad, the average is Rs. 20 lakh. For a loan
amount up to Rs. 4 lakh, parents should be the joint borrowers and above that amount, a
guarantee or some security in terms of tangible assets is required, depending upon the bank.
Simple rate of interest is charged depending upon the base rate of the bank. It is not
mandatory to pay the interest during the study period; however, if paid regularly during the
study period, some concession is also provided by a few banks. The repayment tenure varies
between 10 years and 15 years depending upon the loan amount and repayment begins
between six months and two years of the course completion. Early repayment has no
associated charges

Vehicle loan
Compared to other loans, it is easier and simpler to take vehicle loans. Vehicle loans involve
less paperwork and around three to six working days are required to get the clearance. The
interest rates vary from bank to bank based on their base rate. The repayment process
involves Monthly EMIs and early repayment options
Loan against Insurance Policy
Any individual having an insurance policy can take loan against it from the insurance
company. The amount of loan depends upon the type and period of the policy. It is generally
up to 80 percent of the surrender value of the policy. The rate of interest on loan against
insurance is very less and varies with the companies. The tenure (during the policy term) and
repayment options are decided by the insurer company as per their policies. The unpaid loan
amount/ interest amount is adjusted to the policy amount before any payment against the
policy is made.
Loan against PPF
Loan against PPF is one of the easiest and most beneficial loan options in India. The loan is
disbursed easily. The loan against PPF is usually of a small amount depending upon the
money in the PPF account. The rate of interest is 2 percent more than the rate of interest
given for the PPF at the time when loan is taken. The loan is available from the second year
of account opening, i.e., after completion of one year of account opening. The loan can be
availed within five years of account opening. If five financial years have passed since the
account opening, the account holder cannot apply for the loan. The repayment of the loan
should be made in next 36 months, i.e., three years from the date of loan.
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Comparative study on gold loan

Gold loan

Gold loan is imparted only on providing gold as security to a bank or any other lending
institution. It is considered as one of the safest methods as the loan amount is provided on the
basis of the security submitted. Amount ranging from Rs. 5k to 25 lakh can be taken as loan
against gold. Amount equivalent to 80 percent to 90 percent (varying from bank to bank) of
the total value of the gold is given as loan to the borrower. Depending upon the bank, the
tenure of gold loan varies from one day to two years. The extension of tenure is also allowed
by few banks. T-he rate of interest usually ranges from 14 percent to 24 percent, depending
upon the financial institution. The banks charge processing fees of up to 1.5 percent. There is
no prepayment fee. You can repay the gold loan any time during the tenure. EMI policy also
varies from bank to bank; few banks prefer EMIs where interest and principal are charged
monthly, whereas few only charge the interest on a monthly basis and offer flexibility for the
payment of the interest amount.

A gold loan is a loan which is taken against gold as a security. In India, gold loan has become
popular these days. Many private banks, nationalized banks and finance companies are
12

Comparative study on gold loan


offering these loans at a very attractive interest rate. It is a type of short-term loan offered by
financial companies to the borrowers who need to finance expenses such as marriage of a
daughter, education of their children and various other small financial needs of the family. In
the earlier times also people took loan from money lenders in exchange of gold jewellery.
The borrowers had to pay regular monthly interest to the money lenders. The lenders at that
time charged a very high amount of interest. At times it happened that the borrowers played
interest more than the value of the principle amount of loan. So the concept of gold loan is
one of the oldest in the history of the Indian financial structure.
The same concept is available today with certain terms and conditions to meet the short-term
financial needs of the borrowers. Borrowers were exploited in the earlier days by charging a
higher rate of interest on the loan amount. The invention of commercial banks in the
economy was a boon for the society. The banks were the biggest help for people who needed
loans on a regular basis for various reasons. The banks rates on loans were regulated by the
Reserve Bank of India. They were further reduced by the central bank after the banks were
nationalized.
Gold is an important asset which can be converted in-to liquid money very easily. It can be
exchanged for loan as well. It can be utilized to get financial aid instead of just keeping it idle
at home. It is the best option to support small finances of yourself and your family. In India,
"Muthoot Finance" is one of the biggest financial company that lends money against gold. In
the recent days people opting for gold loans has risen to 24% from 17% with the rise in the
gold prices. Like every other loans even gold loan comes with additional charges like
processing fees, interest charge, valuation charge, late payment penalty and pre-payment
penalty. These charges are not compulsorily charged by every service provider. Some may
waive off certain charges while others may not. It is wise on the part of the borrower to go
through all the terms and conditions of the loan before making a final decision. It is advisable
to get detailed information about the loan from the service provider because these charges
could change the final amount of loan.
Gold loan (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
non-fin

13

Comparative study on gold loan


Ancialasset (i.e., non-monetary gold).the gold remains on the books of the gold lender, and
the lender retains the exposure to the market 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 submissions of all
the required documents and satisfactory assessment of gold ornaments. Loan amount is
disbursed bycashed or funds transfer to an account (as the case may be).
In the case of default in repayment, penalinterest (as 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 rates
Gold loans 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 you gold jewellery and ornaments. The procedure is simple,
documentation is minimal and approval is quick.

FEATURES OF GOLD LOAN


Key features of gold loan

Secured

Loan is borrowed against the gold deposited by the applicant

The loan can be used for purpose, as long as it is not for any illegal
Multi-purpose

activity speculation in the stock market.NBFC,s place even fewer


restrictions on the use of loan

14

Comparative study on gold loan

NBFCs and the unorganised sector disburse loans at a much faster


Loan disbursal
times

pace(as low as three minutes to a few hours)as compared with the


banks
which may take a few days

High loan-to-value
(LTV)ratios

While banks would typically not give more than 75% of the gold
value as loan,NBFCs lending could go as high an 95% in case of
high purity gold
There is no minimum for the loan and, if needed be one can return the

Shorter loans
tenure

Loan amount the very next day. The average tenure of the gold loan is
about90 days to 100 days
The interest rates depends on the tenure and the amount of loan.it
varies from 12% to 18% in the case of banks, while NBFCS,it can

Varied interest
rates

reach 24%.the interest rates charged by the unorganised sector are


much higher and can range from 30%to 50%.resonable rates of
interest are especially applied if the gold loan to value does not
exceed 50-60%

Repayment can be structured as just interest amount with principal


Multiple repayment being repaid at the end of the period in one lumpsum.Repayment
options

through EMI, covering interest as well as principal, can also be an


option

15

Comparative study on gold loan


ADVANTAGES OF GOLD LOAN

Gold loan doesnt demand any certificate to show your salary or income and even no
credit card history is required. Thus even unemployed and non-working people can
go for gold loan.
Unlike any other unsecured loan, gold loan doesnt require many papers, only few

documents such as ID proof and address proof is enough to avail for such loan.

One of the main advantages of gold loan is its low interest rates. Usually loan over gold is
provided at the interest of 12-16% per annum and this is quite low compared to personal
loans available at interest rates of 15-26% per annum.
In rural areas Agricultural loan against gold is also available for agriculturist at very

nominal rate of Interest of 7%-8%, proof of agricultural document needs to be


provided
Gold loan is the most simple and convenient forms of loan because here all you need

to do is pledge your gold with a bank or finance company and get Upto 80% of the
market value of the gold as a loan.
Borrower will be given an option to pay only interest during the entire term and at

the end of the tenure you can pay complete borrowed amount in single shot.
In case of gold loan processing time is very less. Usually banks take just few hours

to complete the process where as in case of NBFCs (Non-Banking Financial


Companies) a few minutes is enough for the same. So for immediate financial help
this is the best option

16

Comparative study on gold loan


Chapter-02

History of gold loan


History of gold loan
Background of Muthoot finance
Background of Mannappuram finance

HISTORY OF GOLD LOAN


Gold is a brilliant yellow precious metal that is resistant to air and water corrosion.it us a very
soft and pure metal. Gold is the most malleable and ductile metal found on the earth. Thats
why it is expensive and alloyed with other metals, usually copper and silver to make it less
expensive andharder, 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 part 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 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,
anddentistry, also for other medical purpose. Though gold is very highly liquid asset, itwasnt
until recently that consumers leveraged it effectively to meet their liquidity needs.
Lenders provide loans by securing gold assets as collateral.comapred with the rest of the
world in India the gold loan market is big business. Until a decades back, most of the lending
was in the unorganised sector through pawnbrokers and money lenders. However this
scenario changed with the entrance of the organised sector players such as banks and nonbanking financial companies (NBFC, s) which now command more than 25% of themarket.
The organised sector gold loan market has grown at 40% CAGR from 2002 toi2010.NBFC,
shave been major driving force behind the growth given their extensive network. Faster
turnaround time, higher loan to value ratios and the ability to save non bankable costumers.
Oflate, banks have improved their gold loan product features and services. Coupled with

17

Comparative study on gold loan


comparatively lower interest rate charges, bankstand to gain to gain market share at the
expenses of NBFC, s in the near future.
The eligibility criteria required to apply for gold loan in India includes three factors. Firstly,
the person has to be above 18 years of age. Secondly, the person applying or a gold loan in
India should have an ID and adressproof and last but not least the applicant should be a
constant flow of income.

Gold price in India- 40 years of history

Gold has always fascinated us Indians but do you know how prices of gold have varied in
India. I happen to visit RBI website which publishes lots of reports including weekly gold
prices
So here it is 40 years price history of gold

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Comparative study on gold loan


BACKGROUND OF MUTHOOT FINANCE
Muthoot finance is a flagship company of the Muthoot Group based Southern India.
The group has a presence in diverse businesses includingfinancing, healthcare, real estate,
education, hospitality, forex, wealthmanagement services, money transfer services, power
generation andentertainment Muthoot Finance Ltd (MFL), incorporated in 1997, is the Kerala
basedlargest gold financing company in India in terms of loan portfolio. The companyoffers
gold loan to individuals like small businessmen, vendors, traders, andsalaried individuals who
cannot access formal credit for reasons like lack ofcredit history, documentation,
accessibility. The company generally gives small
Ticket loans (average ticket size of ~`31000) with a tenor not exceeding oneyear, thereby
limiting interest risk and asset-quality concerns. The loan-to value varies from 60%-85%.
Muthoot Finance Gold Loan portfolio as ofNovember 30, 2010 comprised approximately 4.1
MN loan accounts in Indiawhich it serviced through 2263 branches across 20 states. The
company hasfurther 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 February2011. As of
February 28, 2011, the company has employed 15,664 persons.Other than Gold Loans
business, the company provides money transferservices through their branches as sub-agents
of various registered moneys transfer agencies.

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.


19

Comparative study on gold loan


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.


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

20

Comparative study on gold loan


BACKGROUND OF MANNAPPURAM FINANCE
Gold loans sector
For the gold loans sector, 201112 began well with the leading gold loan NBFCs reporting
continuing gains in volumes and market shares. However, in the final quarter of the year, the
sector ran into headwinds, with the Reserve Bank of India (RBI) intervening strongly to
address perceived risks building up in the financial system on account of increasing exposure
to gold loan companies. It may be recalled that RBI's tightening had actually begun in,
February 2011, with a notification that denied priority sector status to any finance extended
by the banking sector to the gold loan NBFCs. It had the impact of raising the borrowing
costs of the gold loan NBFCs by about two percentage points. This year, on March 21, the
RBI imposed a cap on the loan to value (LTV) ratio for NBFCs at 60% of the value of
collateral. RBI's concern is that the rapid growth of gold loan companies, along with a
dependence on public funds, poses a systemic risk. Further, there was concern about
concentration risks in the gold loan NBFCs, arising from their singleproduct focus.
While the market has interpreted RBIs stance as being negative to the gold loans sector, as
insiders in the industry, we hold a different view. Indeed, we are convinced that the RBI has
acted out of its key responsibility to prevent critical risks from materialising. At the same
time, we also believe that gold loans can be a transformative force in India's financial sector,
particularly in promoting financial inclusion and in monetising India's vast stock of private
gold. Therefore, it's imperative that we do not lose sight of the significant upside potential
that gold loans hold. By restricting the LTV to 60% and making it applicable only to the
NBFCs, there is a real risk of breathing new life into the unorganised sector (local
pawnbrokers and moneylenders), and of stifling the original innovators in the business.
However, we expect the RBI to continue to keep a close watch on the evolving situation and
recalibrate its policy responses as required. The fact that they have now constituted a working
group, led by Shri K.U.B. Rao, to study the business of gold loans is a positive step in this
direction, and we are hopeful of a favourable outcome.
WIDER RELEVANCE OF GOLD LOANS
Ultimately, the true test of sustainability of a business is not the returns to promoters and
shareholders, but how much of value flows back into the society. On this count, India owes a

21

Comparative study on gold loan


debt to its gold on NBFCs. Gold kept idle in our lockers and vaults is a drag on the economy
because it keeps billions of dollars in savings out of the financial system. Gold loans generate
economic activity out of an unproductive asset. Thanks to the momentum given by the gold
loan NBFCs, a host of new players have entered the business and we can expect more of our
idle gold put to productive use. Incidentally, the Indian governments own efforts to monetise
private gold, notably through the Gold Bond and the Gold Deposit schemes, were failures.
Financial inclusion is a national priority, and gold loans can be a useful tool in achieving this
objective. Unlike other indicators of wealth, the larger part of India's private gold (about
65%) is held by rural India. The poorer households own gold in significant measure, as part
of their savings. In a context, where the economically challenged and the financially excluded
Indian households are known to possess gold in some measure, gold loans represent the
prudent way forward. What's more, these gains are delivered even as disadvantaged
borrowers pay less interest on their borrowings than before. An unintended consequence of
the expansion of the gold owns NBFCs has been that unregulated local financiers are forced
to drop their interest rates in response to the increased competition. Not surprisingly, we
believe there's every reason to be optimistic about the longterm future of India's gold loan
sector.
KEY EVENTS, MILESTONES AND ACHIEVEMENTS YEAR
1) Shri V.C. Padmanabhan, a visionary of his times, establishes Mannappuram Finance at

Valspar, a coastal village 25 kilometres away from Trissur town. The main activity of the
firm is money lending and gold loans. Over the years, the business flourishes and it
acquires a reputation as a safe-haven for the savings of the local people, offering good
returns and total safety.
2)

MFL becomes first NBFC from Kerala to go for a credit rating exercise. ICRA assigns
rating of MA to its fixed deposit programmer. MFL approaches the capital market with its
first Public Issue of shares. As the first Kerala based NBFC to go for a public issue, the
shares are listed on the Bombay, Madras and Cochin stock exchanges.

3) MFL becomes first NBFC in Kerala permitted by RBI to accept deposits from the public

without restrictions on the limit. The company is also permitted to set its own interest rate
4) Becomes the first NBFC in Kerala to be given a Certificate of Registration by the RBI.

A major policy change sees MFL shifting its focus to gold loans
5) MFL commences foreign exchange business with moneychangers license from RBI.

Later, in 2007, it becomes first NBFC from Kerala to receive AD- II (Authorized Dealer
22

Comparative study on gold loan


II) License from RBI.
6) Mannappuram Finance (Tamil Nadu) Ltd. (MAFIT) established with registered office in

Coimbatore consequent upon takeover of Sterling Gem Finance Pvt. Ltd. MAFIT was
later merged with MAGFIL we.f. April 1, 2008.
7) In a significant breakthrough, MFL attracts institutional funding for the first time when

ICICI Bank sanctions working capital facility of Rs.25 crores under a bilateral
assignment model. Until this point, MFL had been largely dependent on deposits from
the public
8) Singapore government-owned investment fund Fullerton India/Temasek enters the

picture with initial sanction of a credit limit of Rs.50 crores to MFL. Within a year, the
limits are enhanced to Rs.475 crores
9) First NBFC in Kerala to receive foreign institutional investment in December 2007 with

Sequoia Capital and Hudson Equity Holdings investing Rs.70 crores. In November, 2008
more FIIs come in and company raises Rs.70.75 crores. In April 2010, a further Rs.245
crores is raised through the QIP route.
10) Total business volumes of MAGFIL cross the Rs.1, 000 crore milestone in August, 2008.

Remarkably, within the next two years (i.e. by October 2010), total business volumes
cross Rs.5, 000 crores.
11) March, 2010: MAGFIL opens its 1001st Branch at Trissur town. The occasion is

celebrated on a grand scale with a Cultural Programmed at Lulu Convention Centre,


Trissur, on 7th March with star singers K.S. Chitra, M.G. Sreekumar and Vijay Yesudas
participating in the presence of actor Mohan Lal and a host of other dignitaries.
12) Kerala superstar Mohanlal signs on to become the brand ambassador for MAGFIL in

Kerala.

Later,

superstars Vikramin Tamil

Nadu, Venkatesh in Andhra

Pradesh

and PuneethRajkumar in Karnataka also become brand ambassadors for Manappuram


13) MAGFIL declares its Annual results ending March 31, 2011.
14) Net profit for the year more than doubles to Rs.282.66 crores.
15) Assets under Management (AUM) records three-fold growth to Rs.7, 549 crores.
16) Board of directors approves a 1:1 bonus issue, along with a final dividend of 30% on the

enhanced capital.
17) Third occasion in the last five years that the company has declared a 1:1 bonus.

June The company adopts a new name, Mannappuram Finance Ltd., in place of the
earlier name Mannappuram General Finance and Leasing Ltd.
23

Comparative study on gold loan


Chapter-03

Survey of Indian gold loan market


Effective summary
Background Gold and the Indian society
Major players in Indian gold loan market
Role of technology
Recently development and future outlook
Risk to borrowers and lenders

EFFECTIVE SUMMARY
Gold has long been a valued commodity, particularly in India where it is considered
auspicious, and has been in use for centuries in the form ofjewelry, coins and other assets.
Though gold Isa 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 moneylenders. However, this
scenario changed with the entrance of organized sector players such as banks and nonbanking finance companies (NBFCs) which now command more than 25% of the market.
The organized gold loan market has grown at 40% CAGR from 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 and charges, banks stand to gain market share at the
expense of NBFCs in the near future.
With rapid growth, regulatory scrutiny has increased on gold loan lending practices. NBFCs
24

Comparative study on gold loan


are under greater focus as a result of their higher interest rates and charges, and nonadherence to know your customer (KYC) regulations. This may further impact the dominance
of NBFCs in the gold loan market.
At just 1.2% of the total gold stock in the country at present, gold loans have a huge growth
potential. However, firms need to develop distribution, product and risk mitigation strategies
to get a share of the pie in a profitable and sustainable fashion.

BACKGROUND- GOLD AND THE INDIAN SOCIETY


As previously noted, gold has traditionally been among the most liquid assets and is an
accepted universal currency. It has traditionally been consumed by individuals in the form of
jewelry, especially in India where it is considered auspicious. Gold is presumed to be a safe
haven in times of economic uncertainty, a fact exemplified by a 30% increase in the value of
gold over the past year.
India is one of the largest markets for 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
prices have increased at more than 19% CAGR from 2002 to 2010, gold stock in India has
grown at 22% CAGR during the same period to 18,000 tons (Rs. 32,000 billion) as depicted
in Figure 1. The demand for gold has followed a regional trend with southern India
accounting for 40% of annual demand, followed by the west (25%), north (20-25%) and east
(10-15%).
Indian households typically have an emotional attachment and sense of personal belonging to
the gold they own, which is usually in the form of jewellery, coins or bars. Thus, gold owned
by Indian families is rarely liquidated unless in extreme financial need consequently,
monetary value of a gold investment is rarely realized. But, pledging gold ornaments and
other gold assets to local pawnbrokers and money lenders to avail loans has been prevalent in
the Indian society for many decades, particularly in rural areas. However, over the past
decade, the organized sector banks and NBFCs have taken the lead. The urban populace
is also beginning to realize the potential value that can be realized through gold loans, which
has led to rapid growth of the gold loan market in India.

25

Comparative study on gold loan


Value of gold stock (Rs.BN) Organised gold loan market size (Rs.BN)
35000

600

30000

500

25000

5000

20000

100

400

10000

200

15000

300

300

20000

15000

400

25000
10000

200

500

30000

600

35000

5000

100

0
FY02

FY07 FY09

FY10

FY02 FY07 FY09 FY10 FY11

Source muthootfinance,august 2011

Source muthootfinance,august 2011

Share of Organized Market Players (%)


180.00%
160.00%
140.00%
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
FY02
Public sector banks

FY07
private sectors banks

Source: Muthoot Finance, August 2011 Figure 3

26

FY10
NBFC's

Cooperatives banks

Comparative study on gold loan

MAJOR PLAYERS IN INDIAN GOLD LOAN MARKET


The key players in the Indian gold loan market include the unorganized sector, banks
public/ private/cooperatives and NBFCs. While the unorganized sector, comprising local
pawnbrokers and moneylenders, has traditionally dominated the gold loan market for many
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 pace of 40% CAGR from 2002 to
2010 (see Figure 2) and is expected to grow by 33% to 41% CAGR in 2011. And in doing so,
these companies are challenging the dominance of the large unorganized sector. Within the
organized sector, NBFCs have grown at a rapid rate from 18.4% in FY07 to 32.2% in FY10.

Figure 4 depicts the gold loan portfolio size for key organized sector players, again
highlighting the rapidly growing dominance of NBFCs (e.g., Muthoot Finance,
Mannappuram and Muthoot Fincrop)

27

Comparative study on gold loan

ROLE OF TECHNOLOGY
Information technology has played an increasingly important role in the rapid growth of the
gold loan market.

Technology provides scalability to gold loan businesses, enabling quick roll-out* of


branches and efficient penetration of the underserved markets.

Provision of accurate real-time information has led to faster decision making and
reduced turnaround time for

loan disbursals

Technology has significantly reduced human intervention and thereby, the approval,
disbursal and repayment processes have become much faster, simpler and more
robust. Better adherence to lending regulations (KYC,
Priority lending, etc.), consonance in firm-wide lending activities, efficient tracking of
borrower accounts,
Process transparency and minimization of operational costs are some of the major
benefits realized through the use of technology.

Gold loan firms use negligible or small-scale proprietary IT systems. These are proving to be
inadequate given gold lenders strong growth. Hence, firms are increasingly looking to
leverage technology for further growth. They are engaging enterprise solution providers to
provide integrated solutions for loan origination, servicing and collections.

28

Comparative study on gold loan

Feature Comparison of Gold Lender Offerings

29

Comparative study on gold loan


RECENTY DEVELOPMENT AND FUTURE OUTLOOK
To compete with NBFCs, banks have recently improved/streamlined their loan processes
with some banks purchasing assaying machines to disburse loans in 15 minutes. This poses a
challenge to the growing dominance of NBFCs in the gold loan market, more so since banks
usually charge lower rates of interest compared with NBFCs
Gold loans are among the newest class of assets which have seen rapid growth in
securitization. But, with the restriction on agricultural sector status of gold loans by RBI, the
pace of securitization of these loans is slowing down as most of
These securitizations focused on benefits accrued through the use of agricultural sector
status. Also, RBIs draft securitization guidelines (Sept. 2011) had proposed minimum
holding period (MHP) of 12 months for allowing securitization transactions. Given the short
tenure of gold loans (a year and lesser), securitization of the same will not be possible. A new
proposal is under consideration to modify the MHP form gold loans ton two months, which
would Allow securitization of gold loans.
The government views gold loans as an effective means of meeting the demand for microfinance in India. This would encourage framing of policies favorable to the growth of the
gold loan market.
To counter the rise in borrowing costs due to removal of agricultural sector status on loans
from banks, NBFCs are seeking newer avenues of borrowing. In addition to using bonds and
commercial papers, NBFCs are attracting huge private equity investments of late.
Gold loans have become a basis for creation of new financial products such as loans for
purchase of gold wherein gold is purchased on the date of the loan and held as a pledge until
the equated monthly installments are paid. Gold saving schemes are also emerging wherein
the customers pay regular cash flows which on maturity are added with a certain amount of
interest payment to purchase gold for customers
With frequent hikes in interest rates by the RBI and the subsequent hike in rates by banks, the
cost of personal loan borrowing is increasing. This will lead to an increased consumer
willingness to secure gold loans. Since more than 75% of the gold loan market is still with the
unor ganized segment as of 2010, the organized segment has a huge potential for growth
30

Comparative study on gold loan


through cannibalization of the unorganized segment. A bigger, better and more efficient
network of branches would help the organized segment target this growth area. The gold loan
market in India is still under-penetrated considering the abundant availability of gold as
collateral with Indian private households and the existing size of the gold loan market
(approximately 1.2% of the total gold stock). This presents a significant scope for growth of
the gold loan market

RISKS TO BORROWERS AND LENDERS


Since lenders take possession of the gold assets in a loan transaction, in case of a theft they
may not have sufficient funds to compensate all the borrowers for their loss in its entirety.
This is more important for loans placed in the unorganized sector; banks/NBFCs usually have
better security and insurance coverage. Furthermore, financial packages cannot compensate
for the personal attachment a borrower has with the gold assets.
Moreover, a sharp decline in gold prices increases the original LTV. A lender may require an
immediate recovery of any amount that exceeds the original LTV ratio, but the borrower may
be unable to pay this amount. Restructuring of the loan may be required in these cases.
Additionally, if the value of the pledged asset declines, a borrower may be more willing to
default on the loan. This poses a serious concentration risk to the lender, especially to the
NBFCs that have a high exposure to gold loans and lend at high LTV ratios.
The increase in gold prices over the last few years, coupled with the surge in gold loan
borrowings during this period, could create a gold bubble which could burst in the event of a
significant correction in gold prices. Banks/NBFCs with significant exposure to gold loans
could face widespread defaults, which could adversely impact the economy.
The organized sector today manages these risks through various methods such as enhanced
security, insurance cover, buying gold futures, etc.

31

Comparative study on gold loan


Chapter 04
Organizational profile
Industrial profile
Overview of Indian economy
Overview of Indian consumer market
Gold finance industry in India
Company profile

Muthoot finance limited

Muthoot organizational structure


Mannappuram finance limited
Mannappuramorganizational structure

INDUSTRIAL PROFILE

Overview of the Indian economy


India is the fiftieth largest economy in the world after the European union, the united states,
china and japan with an estimated GDP of approximately US$3.56 trillion in 2009,on
purchasing power parity(PPP) basis. India is also one of the fastest growing economics in
the world .according to the centerstatisticalorganisation, Indias GDP grew at the rate of 7.4%
in fiscal 2010
According to India brand equality foundation, India is one of the largest bullion market in the
world.inida is also the largest consumer of gold jeweller in the world(approx. 20% of global
gold consumption),and the largest importer of gold in the world. Gold imports were approx.
739 tons in fiscal 2010.

Overview of the Indian consumer credit market.


The consumer credit market in india has undergone a significant transformation over the last
decade and experienced rapid growth due to consumer credit becoming cheaper,more widely
available and increasingly a more acceptable avenue of funding for consumer.the consumer
credit market has developed in india due to following factors:

32

Comparative study on gold loan

Increased focused by banks and financial institutions on consumer credit resulting in


the market shift towards regulated leaders from unregulated money lenders/financiers

Increasing tenders of India consumers to acquired assets such as cars, goods and
houses on credit

Fast emerging middle class and growing number of households in our target
segments

Unproved terms of credit as interest rates in India fall in line with global interest rates

Legislative changes that offer greater protection to lenders against fraud and potential
default increasing the incentive to lender.

Growth in assignment and securitation arrangemwnt for consumer loans has enable
non deposit entites to acces wholesale funding and compete solely on their ability to
originate, underwrite and service consumer loans.

Credit avaibility, affordability and consumer confidence are the key drivers for consumer
loans growth.a varity of financials intermidieries in the public and private sectors participate
in Indias consumers lending sectors, including the following:

Commercial banks

Long term lending institutions

NBFCs including housing finance companies

Other specialized financial institutions and state level financial institutions and

Lenders in the unorganized sector

Gold finance industry in India

The recent economic bomb and crash has sent stock wages throughout the economy, creating
radical change in business paradigms, consumer demands, and even in economical cultures
themselves.one of the greatest change in the developing world has been change in the
peoples relationship with gold. Since the days of the Roman Empire, gold has been seen as
both a designer luxury and emended store of value, and because of its portability and use as
jewellery, gold has been a traditional fashion and saving account for the people in
EasterEurope, India and other foreign countries for a very long time

33

Comparative study on gold loan


But latterly, oldhabitsseem to be dying fairly easily. The pawing of gold, which as for a long
time been perused as shameful, israpidly becoming an acceptable practice.in India,
forexample, this long tradition is being replaced by gold loan business which offers penal and
business loans with gold as a security for lower interest rates then one gold have access to
with an unsecured loan. Many of the borrowers are women or who are now becoming more
active members of society and are looking for ways to finance thing such holiday trip,
Childerseducation, and the down payment of house
Private lenders in India are making killing off of this newtrend. Once a very small industry,
the gold loan business has taken off and is now a booming trend in India. This business is an
easy way for people in improvised area to be in acces to quick credit. This is not to say that
credit comes cheap; many of this gold loan businesses charge interest at rates as high as
18%;higher than many of the credit cards we are familiarwith. While this may see a bite
harsh, this is still a great leap forward both cultural and economical for people in third
world.historically, informal lending practice such as these are the begning for develop credit
market in later stage of developmet.ths helps people like those in rural India gain acces to the
credit that they need to be building further for themselves and their children.

COMPANY PROFILE
Muthoot finance

Muthoot finance is the subsidiaries of Muthoot group was established in 1939, and is
primarily involved in financial sector of our country.

34

Comparative study on gold loan

We are the largest gold financing company in India in terms of loan portfolio. We provide
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. Our Gold Loan portfolio as of March 31, 2010 comprised
approximately 2.8 million loan accounts in India that we serviced through 1,605 branches
across 20 states and two union territories in India. According to the IMacs Industry Report
2009, as of March 31, 2010 our branch network was the largest among gold loan NBFCs in
India. We have since increased our branch network to 1,921 branches as of August 31, 2010,
and used our branch network to serve an average of 53,989 customers per day in the month of
August 2010. As of August 31, 2010, we employed 12,220 persons in our operations. We are
a Systemically Important Non-deposit taking NBFC headquartered in the southern Indian
state of Kerala. Our operating history has evolved over a period of 70 years since M George
Muthoot (the father of our Promoters) founded a gold loan business in 1939 under the
heritage of a trading business established by his father, Nina Mathai Muthoot, in 1887. Since
our formation, we have broadened the scale and geographic scope of our retail lending
operations so that, as of March 31, 2010, we were Indias largest provider of Gold Loans. In
the years ended March 31, 2008, 2009 and 2010, revenues from our Gold Loan business
constituted 95.97%, 96.71% and 98.08%, respectively, of our total income. In addition to our
Gold Loans business, we provide money transfer services through our branches as sub-agents
of various registered money transfer agencies, and recently have commenced providing
collection agency services. We also operate three windmills in the state of Tamil Nadu. We
issue secured non-convertible debentures called Muthoot Gold Bonds on a private
placement basis. Proceeds from our issuance of Muthoot Gold Bonds form a significant
source of funds for our Gold Loan business. We also rely on bank loans and subordinated
debt instruments as our sources of funds. As of March 31, 2010, we had Rs.27, 192.5 million
in outstanding Muthoot Gold Bonds and Rs.25, 612.7 million in other borrowings. We also
raise capital by selling a portion of our loan receivables under bilateral assignment
agreements with various banks that purchase our portfolio primarily for meeting their priority
sector lending commitments.

35

Comparative study on gold loan

Our customers are typically small businessmen, vendors, traders, farmers and salaried
individuals, who for reasons of convenience, accessibility or necessity, avail of our credit
facilities by pledging their gold jewellery with us rather than by taking loans from banks and
other financial institutions. We provide retail loan products, primarily comprising Gold
Loans. We also

Disburse other loans, including those secured by Muthoot Gold Bonds. Our Gold Loans have
a maximum 12 month term. Our average disbursed Gold Loan amount outstanding was
Rs.26-, 183.0 per loan account as of March 31, 2010. In the year ended March 31, 2010, our
retail loan portfolio earned, on average, 1.67% per month, or 19.94% per annum. As of
March 31, 2008, 2009 and 2010, our portfolio of outstanding gross Gold Loans under
management was Rs.21,790.1 million, Rs.33,000.7 million and Rs.73,417.3 million,
respectively, and approximately 30.1 tons, 38.9 tons and 65.5 tons, respectively, of gold
jewellery was held by us as security for our Gold Loans . Gross non-performing assets
("NPAs") were at 0.42%, 0.48% and 0.46% of our gross retail loan portfolio under
management as of March 31, 2008, 2009 and 2010, respectively. In the years ended March
31, 2008, 2009 and 2010, our total income was Rs.3,686.4 million Rs.6,204.0 million and
Rs.10,893.7 million, respectively, demonstrating an annual growth rate of 57.56%, 68.29%
and 75.59%, respectively. Our profit after tax in the years ended March 31, 2008, 2009 and
2010 was Rs.636.0 million, Rs.977.2 million and Rs.2,275.7 million, respectively,
demonstrating an annual growth rate of 44.61%, 53.65% and 132.88%, respectively. Our net
worth as of March 31, 2008, 2009 and 2010 was Rs.2, 131.1 million, Rs.3, 614.5 million and
Rs.5, 841.9 million, respectively.
We believe that the following competitive strengths position us well for continued growth:

Market leading position in the Gold Loan business with a strong presence in
under-servedrural and semi urban markets Gold loans are the core products
in our asset portfolio.

36

Comparative study on gold loan


We believe that our experience, through our Promoters, has enabled us to have a leading
position in the Gold Loan business in India. Highlights of our market leading position include
the following:

We are the largest gold financing company in India in terms of loan portfolio. Our
loan portfolio as of March 31, 2010 comprised approximately 2.8 million loan
accounts in India with Gold Loans outstanding of Rs.73,417.3 million

We have the largest branch network among gold loan NBFCs. As of March 31, 2010,
we operated 1,605 branches across 20 states and two union territories in India, and in
the month of August 2010, we served an average of 53,989 customers daily. Our

Branch network has expanded significantly in recent years from 373 branches as of
March 31, 2005 to 1,921 branches as of August 31, 2010, comprising 335 branches in
northern India, 1,322 branches in southern India, 197 branches in western India and
67 branches in eastern India.

We believe that due to our early entry we have built a recognizable brand in the rural
and semi-urban markets of India, particularly in the southern Indian states of Tamil
Nadu, Kerala, Andhra Pradesh and Karnataka. As of March 31, 2010, the southern
Indian states of Tamil Nadu, Kerala, Andhra Pradesh and Karnataka constituted
75.38% of our total Gold Loan portfolio.

We have a strong presence in under-served rural and semi-urban markets. A large


portion of the rural population has limited access to credit either because of their
inability to meet the eligibility requirements of banks and financial institutions
because credit is not available in a timely manner, or at all. We have positioned
ourselves to provide loans targeted at this market.

We offer products with varying loan amounts, advance rates (per gram of gold) and
interest rates. The principal loan amounts we disburse usually range from Rs.2, 000.0
to Rs.100, and 000.0 while interest rates on our Gold Loans range between 12.00% to
30.00% per annum.

37

Comparative study on gold loan

MUTHOOT ORGANISATIONAL STRUCTURE

38

Comparative study on gold loan

Mannappuram finance and leasing limited

Mannappuram origins go back to 1949 when it was founded in Val pad (a coastal village in
the Trissur District of Kerala) by the late V.C. Padmanabhan, father of Shri Nandakumar. Its
activity was mainly pawn broking and money lending carried out on a modest scale. The
principal asset of the company was the integrity and foresight of its Founder and among the
people of the area it soon acquired a reputation as a safe-haven for their investments.

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. Mannappuram Finance Ltd. was incorporated in
1992 (the original name was Mannappuram 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 recognized 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 3,300 branches across 26 states and UTs with Assets
under Management (AUM) of about Rs.10, 000 crores, a workforce of about 18,000 and a
live customer base of 15 lakhs (Data as of 31 March, 2013).

The many achievements: Soon after it commenced its operations, Mannappuram Finance
Limited gathered several "firsts" to its credit. The company was the First NBFC in Kerala to
receive a Certificate of Registration 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, recognizing the
company's ability to make timely repayments of the principal and interest under its then
existing public deposits programmer. Mannappuram 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.
39

Comparative study on gold loan

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, Mannappuram 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, Mannappuram Finance Limited has also
ventured into the Foreign Exchange business with the Reserve Bank of India having granted
an Authorized Dealer - II license 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 Change, Wall Street and MoneyGram.
Human Resources: As an organization that prides itself as a pioneer and innovator,
Mannappuram Finance Ltd derives its strength from the dedication of its highly motivated
staff. Right from inception, the company has been keen to spot and nurture the best available
talent. The HR department of the company places emphasis on professionalism and in honing
the skills of employees to maintain the edge in a competitive world. The company has a fullfledged training establishment where in-house training courses are regularly conducted in a
professional manner to upgrade skills and to enhance functional efficiency. Moreover, the
company sponsors an MBA degree programmer for its employees who have completed five
years of service keen to upgrade their professional skills and qualifications.
The vision: Within the next decade, Mannappuram Finance Limited hopes to emerge as the
largest player in the gold loan sector in India and also to expand its footprint beyond national
borders. The long term vision of the company is to unlock the value of India's large stock of
privately held gold (estimated at about 18,000 tons) to the benefit of the common people of
India, most of who possess savings in the form of gold jeweler. This is neatly summed up in
the Company's corporate tagline, "Energizing gold, empowering people".

40

Comparative study on gold loan


MANNAPPURAM ORGANISATIONAL STRUCTURE

41

Comparative study on gold loan


Chapter-05

Research study on gold loan


(Primary and secondary data and Questionare)
Overview of gold loan
Gold loan schemes- Muthoot and Mannappuram finance
Types of gold testing
Procedure of creating gold loan account in software
Others Questionare based answers

OVERVIEW OF GOLD LOAN


Muthoot finance
The Muthoot Gold loan portfolio is the largest in India as well as all around the globe. It is
humbling to know that more than 81,000 people avail our trusted services on a daily basis.
For the past 128 years, the company has been serving the interests of customers as its top
most priority. Our journey through centuries coupled with the fact that we are still a rapidly
growing company highlights the trust and commitment that our customers worldwide have
shown in us.
With Muthoot Finance Ltd. gold loan services, it takes no more than a few minutes for your
gold to generate cash. The simple procedure that we follow allows:

Quick Loan disbursal

Loan limit stretches from Rs. 1500 to Rs. 1 crore

Pre-payment option-without any penalty

Minimal documentation

In-house gold evaluation

Improves customer service in a shorter response time

Strong rooms for providing safe custody for gold ornaments

Being Indias largest gold loan service provider, safeguarding the deposits of gold ornaments
is our primary concern. A flexible interest rate policy is what helps us cope with volatile
markets. Our gold loan range starts from Rs. 1,500 and stretches up to Rs. 1 Crore. Serving
over 81,000 customers daily, we assist almost every section of the society in obtaining quick
42

Comparative study on gold loan


cash for leveraging their dreams.

Mannappuram finance

1. WHAT ARE THE SCHEMES PROVIDED UNDER GOLD LOAN


BY YOUR BANK?
Gold loan schemes of

Muthoot finance:
SCHEME

SLAB PERIOD/S
Upto 1 month
>1 Upto 3 months

Muthoot Best value Loan (MBL)


>3 Up to 6 months
>6 Upto 12 months
Upto 1 month
>1 Upto 3 months

Muthoot Mahila Loan (MML)*

>3 Upto 6 months


>6 Upto 12 months
Muthoot Super Loan (MSL)

Upto 12 months

Muthoot Premier Loan (MPL)

Upto 12 months
Upto 3 months

Muthoot Advantage Loan (MAL)

>3 Upto 6 months


>6 Upto 12 months

Muthoot Overdraft scheme (MOS)

12 months

43

Comparative study on gold loan

Mannappuram finance:
SCHEME NAME

LOAN TENURE

SLAB
0 - 30 days

GL-SY Scheme

180 Days

31 - 60 days
61 - 180 days

Privilege Loan
(GL-PL)*

90 Days

0 - 90 days

Super Xpress Loan


(GL-SX)

90 Days

0 - 90 days

Simple Interest Loan


(GL-SI)#

90 Days

0 - 90 days

Xpress Loan
(GL-XG)
Value for Money
(GL-VM)*

0 - 30 days
180 Days

31 -60 Days
61-180 days
0 - 60 days

270 Days

61 -180 Days
181-270 days
0 - 30 days

Super Loan
(GL-SG)

270 Days

31 -90 Days
91-150 days
151-270 days
0 - 30 days

Samadhan Gold Loan


(GL-SA)

365 Days

31 -90 Days
91-150 days
151-365 days
0 - 60 days

Super Relax Gold Loan


(GL-SR)

61 -90 Days
365 Days

91-120 days
121-180 days
181-365 days

GL B1-N

90 Days

GL B1+N

90 Days

GL B2+

90 Days

GL B3+

180 Days

44

0 - 60 days
61 - 90 days
0 - 60 days
61 - 90 days
0 - 60 days
61 - 90 days
0 - 90 days
91 - 180 days

Comparative study on gold loan


2. WHAT ARE THE DOCUMENTS REQUIRED FOR GETTING
GOLD LOAN?

Documents required for gold loan application:


Muthoot finance

Mannappuram finance

Demand promissory note

Application form
KYC norms

Pledged form(given by Bank)

Date of birth proof

ID proof

Address proof

NEFT details(cancelled cheque)(in


case of money transfer)

Application form for loan


KYC documents(application +
document)

ID proof

Date of birth proof

Address proof

3. WHAT IS THE ELIGIBILITY CRITERIA FOR APPLYING FOR


GOLD LOAN?
Muthoot finance:
Age limit 18 & above
21 age (in some case of branches)
Mannappuram finance
Age limit 18 & above
(Interest rates are differs according to higher loan amount costumers and
Lower loan amount costumers)

45

Comparative study on gold loan


4. WHAT ARE THE INTEREST RATES CHARGED ON OUR
GOLD LOAN SCHEMES?
Interest charged by the bank:Muthoot finance

ROI

Mannappuram finance

ROI

Muthoot Best value Loan

14%

B1+N

19.33%

24%

B2+

17.33%

22%

B3+

21%

(MBL)
Muthoot Mahila Loan
(MML)
Muthoot Super Loan (MSL)
Muthoot Premier Loan
(MPL)
-Muthoot Advantage Loan
(MAL)
Muthoot Overdraft scheme
(MOS)

21%

Samadhan Gold Loan


(GL-SA)

25.25%

18%

Super gold loan


(GL-SG)

25%

19%

Super relax gold loan(GL-SR))


Super Xpress Loan
(GL-SX)
GL-SY

21.67%
24%
22.66%

Value for money


(GL-VM)

23.77%

Xpress loan

25.50%

(GL-XG)

5. WHAT IS VARIOUS CHARGES CHARGED ON GOLD LOAN


OFFERING
Muthoot finance:
Processing charges:
1% of the loan amount for loans below Rs.10 lakhs
0.5% of the loan amount for loans of Rs.10 lakhs & above and Upto Rs.25 lakhs
0.25% of the loan amount for loans of Rs.25 lakhs and above

46

Comparative study on gold loan


Penal interest @2% p.a. is chargeable in addition to the interest as above on loans outstanding
for more than 12 months.

Mannappuram finance:

Postage charges:
Loans
Up To Rs.10,000/-

Loans Above Rs.10,000/&


Upto Rs.20,000/-

Loans
Above Rs.20,000/

90

120

150

Processing charges: at the time of loan settlement Rs 10 only


Stamp duty charges: less or equal to NIL, above 1 lakh 0.1%

6. WHAT IS YOUR MARGIN ON GOLD LOAN SCHEMES FOR


YOURE BANK?
Muthoot finance and mannappuram finance:
25% - 30% (as per RBI guidelines)

7. WHICH SOFTWARE IS USED BY YOUR BANK TO OPEN THE


ACCOUNT OF COSTUMERS?

Muthoot finance

Mannappuram finance

Core banking solution(CBS)


A software of Muthoot finance
limited

47

IBM and SYSNET

Comparative study on gold loan


8. HOW GOLD LOAN IS DISIMBURSED?
Gold disbursement procedure
Both Muthoot and mannappuram finance apply same procedure...

9. WHAT ARE THE RESTRICTIONS AND REGULATIONS


GIVEN

BY

RBI

FOR

PROVIDING

GOLD

LOAN

TO

COSTUMERS?

Muthoot finance
There are many restrictions and regulations provided by RBI which all NBFCs has to follow:
a.

NBFCs cannot sanction above 75% of the loan amount of actual amount of
total gold ornaments pledged.

b. Interest rate charged by bank should not exceed 22%( as per RBI)
c. Gold is permitted only against gold ornaments (for eg. Jewellerys etc.). Gold
coins, gold biscuits, gold bars cannot be pledged for getting loan against gold.
d. KYC norms should be strictly complied, if not can be punishable according to
act.
48

Comparative study on gold loan

10. WHAT ARE THE TYPES OF TESTING PURITY OF GOLD?

Types of gold testing


These are the various type of gold testing in India. Muthoot finance and mannappuram
finance
Acid test: Acids have +ve charge particle gold rubbing with stone and throw them
acids if gold colour change them the gold is not original if colour is not change gold
is original
Flexibility test: Gold move in all direction gold is very flexible to move other
element can break when move but gold cant be break
Sound test :We check the sound of gold if gold bangle and other element bangle
both are hit any particle we hear the sound if gold is original it give specific sound if
gold is not original it give same sound as the other bangle.
Colour test: Gold have yellow colour but if gold is duplicate its colour is different
from yellow.
Smell test: Gold have specific smell as compared to other element if we have test the
gold smell there are the specific machine and cheek the gold smell.
Salt test: When gold mixed in salt if colour change gold is not original if colour not
change gold is original.
Weight test: If we see the 50 gram of gold and 50 gram of sugar then size of gold is
small as compare to sugar.
Rubbing test: When gold rubbing with stone if gold is original it appears yellow
colour if gold is not original it having different colour.

49

Comparative study on gold loan


11. WHAT ARE THE SAFETY MEASURES FOR GOLD LOAN
PLEDGED?

Muthoot finance
Muthoot finance have a strong room in which the pledged gold ornaments of costumers are
kept. Regular checking of gold ornaments are done through banks.

Mannappuram finance
Mannappuram finance have a safe vault in a safe room in which the gold ornaments are
pledged.

12. WHO ARE THE MAJOR COMPETITORS IN GOLD LOAN


MARKET?
Muthoot finance:
Mannappuram finance, Muthoot fincrop,IIFL, karvi finance,nationalised banks, private credit
societies (PATHPEDIS), jewellers.

Mannappuram finance:
Muthoot finance, Muthoot fincrop, IIFL, private banks, co-operative banks, public sector
banks.

13. HOW MUCH EMPLOYEES ARE WORKING IN GOLD LOAN


DEPARTMENT? WHAT IS AVERAGE SALARIES OF THE
EMPLOYEES?
Muthoot finance:
Each branch is employed with a (except some braches):

50

Comparative study on gold loan

Employees

Approx. salaries

Each Branch head

28000

3 accounts staff

12000-15000

Costumer care executive(CCA)

12000-13000

2 security guards

9000

Mannappuram finance:
5-6 person per branch of average salaries 12000.

14. HOW MUCH GOLD FLUCTUATIONS AFFECT YOU IN YOUR


GOLD LOAN BUSINESS AND INTEREST RATES?
Muthoot finance and mannappuram finance:
Any gold rate fluctuations in the gold market does not affect in business of NBFCs .the
effect takes place only on the gold loan amount sanctioned. The amount of loan sanctions
depends on the gold rate in the market .either the loan amount can decrease or increase
depending on gold rate fluctuations in the market. Gold loan offerers do not have any risk.

15. WHAT IS PROCEDURE OF CREATING GOLD LOAN ACCOUNT


Procedure of creating gold loan account in software
Open the shortcut of gold loan.
Put your user ID and password.
Click on truncation after that go new lone express entry.
Before doing anything we have to press + for further process and generate
gold loan number
We have to fill customer details with three stages

Client details

51

Comparative study on gold loan

Address details

IP photograph (we browse the photo of customer and gold items one by one

After fill all these details press save GOLD LOAN number will be generated

When the gold loan number will generated please ensure before doing further process
deduces must be done
If there is any deviation (in terms of ROI, per gram rate and valuation %age)so, it
should enter in to the client details as the first stage
Now again we have to fill the details a s under

Appraisal form

Cash disbursal

Bank details

(Appraisal form : Valuer I Before start anything we have to press on + then enter all the
information like item, Gross weight , Net weight, per gram weight after filling these
information press save this process should be repeated for each and every item by Valuer I
Valuer II: now the above noted process should be repeated by Valuer II also when we enter
the all information on appraisal form finally press the Edit and then Save.
Cash disbursal: first press + then enter the denomination of cash to be disbursed to the
customer then press disburse cash finally we press Edit and Save.
Bank details: there is no need to fill bank details in the case loan is less than 10 laces, on the
other hand if loan above 10 laces then press add new then enter the details then press Edit
and save.
Now we should give the print command and get the hard copy for customers signature the
print will generated the following document on six pages.

Application form

DPN

Appraisal form

Declaration form

Borrower copy-given to the customer

52

Comparative study on gold loan

Token card original should give to the customer and take Xerox for office
record.

Cash disbursal receipt

Total 11 signature are obtaining form the customer on the above documents we should
give three documents to the customer

Borrower copy

Token card

Cash receipt

Now we should generate/ complete the following document and upload the same along
with the five documents for sanctioning of the loan.

I.D proof

Address proof

Pan card (in the case of above loan is 50000) TVR from CPV report

53

Comparative study on gold loan


Chapter-06

Data analysis and interpretation


(OnQuestionare circulated)
Data analysis
Findings
Conclusions

1.ARE YOU AWARE OF GOLD LOAN?


Option
Response
%

Yes
11
92

No
1
8

RESPONSE
8%

yes
no

92%

Analysis: - from the above graph it is clear that 92% of the population are
aware about the gold loan and 8% 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. It may be
because of in the society they live and due to modernisation.

54

Comparative study on gold loan


2. HOW DO YOU COME TO KNOW ABOUT GOLD LOAN?

Friends

Wall

Direct

painting

marketing

Response

12

29

29

12

12

Option

Newspaper

Banners

and

TV

relatives

response
6%

12%

12%
12%

29%
29%

wall painting

direct marketing

newspaper

banners

friends and relatives

tv

Analysis:-It is clear from the table that 12% of the aware only because of TV
advertisement,

6% are because of wall paintings, 12% are due to direct

marketing, 29% are newspaper,

29% are banners and 12% are due to friends

and family.

Interpretation:-from the above graph it is clear that majority of the population


are aware only because of newspapers and banners, some are because of direct
marketing and very few are because of direct marketing and TV advertisement.
55

Comparative study on gold loan


3. HAVE YOU EVER TAKEN GOLD LOAN?

Option

Yes

No

Response

11

92

response
no

yes

6
response

10

12

Analysis: - from the above graph we can see that 8% of the population have
deal and 92%have not deal in gold
.
Interpretation: - from the above graph we can see that most of the people are
not dealing in gold loan and very few are dealing with gold loan. Inspite of been
heard about gold loan, never dealt with. This can be because of human nature in
point of gold ornaments pledging

56

Comparative study on gold loan


4. DO YOU WANT TO TAKE GOLD LOAN IN FUTURE?

Option
Response
%

Yes

No

11

92

GOLD LOAN IN FUTURE


yes

no
8%

92%

Analysis: - from the above graph we can see that 8% of the population want to
deal in the gold loan in future and rest of 92% dont want to take.
.
Interpretation: - from the above graph we can see that most of the people do
not want to deal in gold loan in future and very few are dealing with gold loan.
Inspite of been heard about gold loan, never dealt with. This can be because of
human nature in point of gold ornaments pegeding. Indians are very
conservative in nature in part of gold ornaments. So many people do not take
gold loan, prefer personal loan

57

Comparative study on gold loan


5. WHICH COMPANY WOULD YOU LIKE TO DEAL WITH?

Muthoot

Muthoot

Manappuram

Federal

finance

fincrop

finance

bank

Response

75

17

Option

others

COMPANIES
muthoot finance

muthoot fincorp

mannappuram finance

federal bank

others

17%
0%
8%
0%

75%

Analysis: - from the above graph it is clear that 75% of the population wants to
deal with Muthoot finance, 17%are dealing with other companies and few are
dealing with manappuram finance and leasing limited, Muthoot fincrop, future
group
Interpretation: - from the above graph it is clear that most of the customer are
dealing with Muthoot finance and other companies. And very small are dealing
with Mannappuram, Muthoot fincrop

58

Comparative study on gold loan


6. WHICH OF THE FOLLOWING IS THE MOST PREFERABLE

THING AT TIME OF AVAILING GOLD LOAN?

Option

Rate of
interest

Flexibility

Costumer

Less

dealing

documentation

Others

Response

58

25

17

PREFERANCE
rate of interest

flexiblity

costumer dealing

17%

loss documentation

others

0%

0%

25%

58%

Analysis:-from the above graph it is clear that 58%of the population are
preferring only because of rate of interest ,25%are because of flexibility,17%are
because of less documentation required in gold loan
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 flexibility and vary few are less documentation. So rate of interest
and flexibility also plays an important role in gold availing.

59

Comparative study on gold loan


7. ARE YOU SATISFIED WITH CURRENT DEAL?

Option

Yes

No

Not yet taken

Response

34

58

yes
CURRENT DEAL
1
8%

no
4
34%

not yet taken


7
58%

Analysis- from the above graph it is clear that 58 % of the population have not
taken the gold loan in their life but majority of are aware of gold loan existence
and 34% of the population are not satisfied

Interpretation: - from the above graph it is clear that most of the population
have not taken gold loan so satisfaction is not preferable here, and some are
satisfied with their current deal.

60

Comparative study on gold loan


8. WHICH OF THE FOLLOWING IS THE MAIN REASON OF

SATISFACTION ACCORDING TO YOU?

Rate of

Maximum

interest

rate

Response

67

17

Option

Flexibility

Costumer
dealing

Others

SATISFACTION FACTOR
rate of interest

maximum rate

costumer dealing

others

flexibility

8% 0%
8%
17%
67%

Analysis:-from the above graph it is clear that 67%of the population are
satisfied only because of rate of interest 17%are because of max per gram rate,
8% are because of good customer dealing and flexibility and very 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.

61

Comparative study on gold loan


9. DO YOU WANT TO CHANGE YOUR LOAN WITH OTHER

COMPANY?

Option

Yes

No

Response

25

75

company change

25%
yes
no

75%

Analysis: - from the above graph it is clear that 25% of the population want to
change their company and 75%of the population do not want to change.

Interpretation: - from the above graph it is clear that most of the population
dont want to change their company and very few want to change the company.

62

Comparative study on gold loan


10. ARE YOU AWARE OF MUTHOOT FINANCE LIMITED?

Option
Response
%

Yes

No

10

83

17

MUTHOOT AWARNESS
yes

no

17%

83%

Analysis: - From the above graph it is clear that 83% of the population are
aware about the Muthoot finance and 17%of the population are not aware about
the Muthoot finance

Interpretation: - From the above graph we can see most of the population are
aware about the Muthoot finance but still the rates of those people are also high
who are not aware about the Muthoot finance .the Company can take many
measures to promote their company so that the numbers of not aware can know
the company.

63

Comparative study on gold loan


11. ARE

YOU AWARE OF MANNAPPURAM FINANCE AND

LEASING LIMITED?

Option

Yes

No

Response

58

42

MANAPPURAM AWARNESS
yes

no

42%

58%

Analysis: - from the above graph it is clear that 58% of the population are
aware about the manappuram finance and 42%of the population are not aware
about the manappuram finance.

Interpretation: - from the above graph we can see most of the population are
aware about the Manappuram finance but still the rates of those people are also
high who are not aware about the manappuram finance. The Company can take
many measures to promote their company so that the numbers of not aware can
know the company. But still the number is far away from Muthoot awareness.

64

Comparative study on gold loan


12. HAVE YOU EVER VISITED THE BRANCH OF MUTHOOT

FINANCE LIMITED?

Option

Yes

No

Response

11

92

branch visit

yes

no

Analysis: - from the above graph it is clear that 92% of the population have not
visited the Muthoot finance branch and 8%of the population have visited
Muthoot finance branch.

Interpretation: - from the above graph we can see most of the population have
visited Muthoot finance branch but still the rates of those people are also high
who Have not visited the Muthoot finance branch. The company can promote
and launch various offers and schemes so the people can visit the branch which
can extend their profit.

65

Comparative study on gold loan


13. HAVE YOU EVER VISITED THE BRANCH OF

MANNAPPURAM FINANCE AND LEASING LIMITED?

Option
Response
%

Yes

No

11

92

branch visit

yes

no

Analysis: - from the above graph it is clear that 92% of the population have not
visited the Manappuram finance branch and 8%of the population have visited
Manappuram finance branch.

Interpretation: - from the above graph we can see most of the population have
visited Manappuram finance branch but still the rates of those people are also
high who Have not visited the Manappuram finance branch. The company can
promote and launch various offers and schemes so the people can visit the
branch which can extend their profit.

66

Comparative study on gold loan


Chapter-07

Findings, suggestions, conclusion


Findings
Suggestions
Conclusions

FINDINGS

The present study comparative study on gold loan w.r.t Muthoot finance and

mannappuram finance and leasing limited is conducted considering both primary


and secondary data. The major finding of the study can be summarized as follows:

The management and employees of both the companies maintain good relationship.

Most of the respondent and employees have monthly income range between 900028000(Muthoot finance) and 10000-15000(mannappuram finance)

Advertisement point will come

Schemes of both companies differs and also differs the consumer interest in
companies. Mannappuram finance has more schemes than Muthoot finance have.

NBFCs score over banks on two fronts despite charging higher interest- quick
approval and disbursal of loan, and less documentation. An NBFCs at most takes
30minutes to give the loan after verifying the gold, and the document required is only
identification proof of the person pledging the gold.

It is found that the processing charges are less of mannappuram finance than the
Muthoot finance were, tenure of the loan remains same if both companies but the
maximum loan amount differs in case of Muthoot finance in 1 crore and
mannappuram finance is 25 lakhs.

67

Comparative study on gold loan

It is found that the security standards of gold pledged is very strong. Both the
companies maintain safe vault and strong room for costumers gold ornaments

RBI gives regulation and restrictions in part of gold loan offering viz. gold coins and
gold bars cannot be pledged for loan etc. strictly KYC norms should be followed.

The study was also aimed at finding the best gold loan financing companies. After
analyzing and interpreting the data from primary and secondary sources the following
finding are:

The estimated gold loan portfolio of Muthoot finance limited (21618 crores) is far
superior to mannappuram finance and leasing limited(475 BN) which indicates the
sound financial positions of Muthoot finance limited

The interpretation of data also indicated that the public is more satisfied with the
interest rate offered by Muthoot finance limited over manappuramfinance and
leasing limited. This might be result of experience in the gold loan market and its
objective to provide gold loan at the cheaper and affordable rates.

It also indicate that both the companies are one of the others competitors and so
are other companies.

As per the primary data collected by visiting the banks, it has been interpreted that
manappuram finance and leasing limited lacks bit in infrastructure side if business
and management part. Muthoot being the more established among the two knows
the infrastructure requirements.

It is also interpreted that the manappuram finance is having more facilities like
rebate on interest paid early and same has charges on overdue of interest paid to
bank so as Muthoot has.

It is also known that the net NPAs (non-performing asset)of the Muthoot finance
34351 lakhs and manappuram finance is having net NPA is 822 million.

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Comparative study on gold loan


SUGGESTIONS
For manappuram finance and leasing limited

They should take up more promotional measure to increase the market shares of the
product

They should concentrate in the expansion of new branches in unexplored areas

They should concentrate on the interest rates offered by them to costumers in various
schemes

Infrastructuralfacilities should be improved and should be of international standards to


compete with the Muthoot finance and the management recruitment of employees in
some of the branches.

Security standards should be improved by manappuram finance with respect of


Muthoot finance

Most of the people are unaware of Manappuram finance and their schemes so should
work on promotional measures of marketing of gold loan schemes

Muthoot finance limited


Muthoot finance should improve in the part of schemes of gold loan. Most of the
people must be not aware of the schemes and most of the people must be needed more
schemes

The company can also give the attractive offers to old costumers as well as new
costumers

Constant increasing in NPA was seen in previous years , company should take suitable
measures to decrease the total NPAs

Company should improve little bit of infrastructural facilities and asset in the
branches in some areas.

The company can tie up with jewelers to enhance their profitability

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Comparative study on gold loan


CONCLUSION

The comparative study of gold loan between Muthoot finance and manappuram finance was
aimed at finding out the reasons which makes these two companies stand out among other
gold loan financing companies and also to identify best gold loan provider among these two
financing giants.
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 gold loan offering companies needs to endeavor with maximum efforts
the company can achieve several milestones in future while maintaining the existing
customer relationship. From these project we can understand which companies is most
preferable to avail gold loan
It helped me to find out different factors responsible for the success of these two companies.
The major finding that can be conducted form this study is that Muthoot finance limited is
still best gold financing company in India and its toughest competitor manappuram finance
limited still lacks in many areas although it has grown rapidly in the past few months
This experience has helped me gain knowledge about the business of gold loan financing in
India

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Comparative study on gold loan


Chapter-08

Bibliography
Bibliography
Webiliography

WEBSITES

Muthoot finance, ncd prospectus, Aug. 2011


Http://www.manapuram.com/php/milestones.php
Http://www.muthootfinance.com
Profit.ndtv.com/stock/mannappuram-finance-ltd_manappuram/reports
Draft red herring prospectus of Muthoot finance limited issued on 30th September 2010
Http://www.moneycontrol.com/master/your money /stocks-newsconsumption.php? Cat=
gold& at0no:=694868
Http://www.business-standard.com/india/news/rbi-norms-to-moderate

gold-loan-

companies%5cgrowth-crisil/161230/on
Http://www.muthootfinance.com/services/gold-loan.html
Http://thegoldwatcher.blogspot.com/2011/05/indian-gold-loan-marketexpanding.html

DOCUMENTS
Boney hector dcroz document on gold loan
Muthoot finance documents

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Comparative study on gold loan


Chapter-09-

Annexure
Sample Questionare

Muthoot finance

Mannappuram finance and leasing limited

Sample Questionare to normal people

QUESTIONARE
(For manager)

For Muthoot and manappuram finance

1) What are the various schemes provided under gold loan by your bank?

2) What are documents required for getting gold loan?

3) What is eligibility criteria for applying gold loan? Having an account with the bank is
mandatory for getting loan?

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Comparative study on gold loan


4) What is interest rate charged on gold loan schemes?

5) What is your margin on gold loan products of your bank?

6) Which software is used by your bank for opening an account of gold loan?

7) How the gold loan is disbursed?

8) What are the restrictions and regulations given by RBI for providing gold loan to
costumers?

9) How the gold loan product is marketed or promoted? What are the mediums of
marketing gold loan schemes?

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Comparative study on gold loan

10) What are the steps for testing the purity of gold?

11) What are your safety measures for gold ornaments pledged?

12) Who are your major competitors in gold loan market?

13) How much employees are working in gold loan department? What is average salary
of the employees?

14) How much gold rates fluctuations affect you gold loan business and interest rates?

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Comparative study on gold loan

QUESTIONARE
(For normal people)
Dear sir/madam,
I am the student of S.K somaiya Degree College of arts, science and commerce and I am
conducting a survey on comparative study on gold loan. The following Questionare
has been drafted to make me understand the need and awareness of the costumer. Therefore I
request you to spare sometime and provide me the following information. I assure you that
this data will not be misused and will only be used for the project purpose.

Name:
Occupation:
Age:
Contact no.:
Email: -

______________________________
______________________________
______________________________
______________________________
______________________________

1) Are you aware about gold loan?

a. Yes

b. No

2) How do you come to know about gold loan?

a) TV

b) wall painting c) direct marketing d) newspaper e) banners f) friends and

relatives

3) Have you ever taken gold loan?

a) Yes

b) No

4) Do you want to take gold loan in future?

a) Yes

b) No

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Comparative study on gold loan


5) Which company would you like to deal with?

a) Muthoot finance b) Muthoot fincrop c) Mannappuram finance d) federal bank e)


others (specify)

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

a) Rate of interest b) flexibility c) costumer dealing d) less documentation e) others

7) Are you satisfied with current deal (if gold loan taken)?

a) Yes

b) No

c) not yet taken

8) Which of the following are main reason of satisfaction according to you?

a) Rate of interest b) maximum rate c) flexibility d) costumer dealing e) others

9) Do you want to change youth loan by other company?

a) Yes

b) No

10) Are you aware about Muthoot finance /mannappuram fianc gold loan?

a) Yes

b) No

11) Have you ever visited any branch of Muthoot finance/Mannappuram finance?
a) Yes

b) No

76

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