Gold Loan Stocks Plummet: Muthoot, Manappuram, and IIFL Shares Drop 10% as RBI Prepares to Unveil New Guidelines

The recent announcement from the Reserve Bank of India (RBI) about forthcoming comprehensive guidelines on gold-backed loans has sent shockwaves through the stock market, particularly impacting companies like Muthoot Finance, Mannapuram Finance, IIFL Finance, Cholamandalam Investment, and Fin Co. Investors reacted strongly, causing share prices to plummet by as much as 20%.

RBI’s New Co-Lending Guidelines

RBI Governor Sanjay Malhotra revealed that these new co-lending guidelines will apply to all regulated entities, focusing on loans secured by gold and non-fund-based businesses. This move aims to create a more structured environment for gold loans, which are a significant source of funding for many individuals and businesses across India.

Stock Market Reactions

As of 12:13 PM, here’s how the share prices were affected:

Muthoot Finance: Dropped by 9.28%, trading at Rs 2,080.
IIFL Finance: Decreased by 4.56%, priced at Rs 318.35.
Manappuram Finance: Fell by 2.58%, sitting at Rs 223.15.
Cholamandalam Investment and Fin Co: Both saw a decline of 2.82%, trading at Rs 1,422 per share.

Economic Impact of RBI’s Decisions

In addition to the gold loan guidelines, the RBI also made headlines by cutting the key repo rate by 25 basis points, bringing it down to 6% for the second consecutive time. This decision reflects a shift in monetary policy from ‘Neutral’ to ‘Accumulative’, indicating potential for further reductions in the future. The aim is to stimulate a sluggish economy that faces challenges, partly due to external pressures such as tariffs imposed by U.S. President Donald Trump.

Key Takeaways for Investors

Expectations for Future Cuts: The RBI’s shift in stance suggests more rate cuts could be on the horizon.
Sector Vulnerability: The immediate drop in share prices highlights the sensitivity of the financial sector to regulatory changes.

This evolving landscape underscores the importance of staying informed about monetary policies and their potential impact on investments in the finance sector. For further insights, check the latest updates on RBI policies and market trends.