muthoot finance: Muthoot Finance and Manappuram Finance shares tank up to 9% after RBI advisory

Shares of gold financiers Muthoot Finance and Manappuram Finance were down between 8-9% on BSE after the Reserve Bank of India (RBI) sent the companies an advisory concerning cash disbursal of loans.

Shares of Muthoot fell up to Rs 1,510 while Manappuram tumbled to Rs 165.15.

RBI had reportedly asked NBFCs to strictly adhere to the Income Tax Act provision on cash disbursement of loans wherein no NBFC should disburse loan amount in excess of Rs 20,000 in cash.

“Please refer to provisions of Section 269SS of Income Tax Act, 1961, which stipulates that no individual can receive more than 20,000 rupees as loan amount in cash,” the letter from the Central Bank stated.

“Consequently, no NBFC should disburse loan amounts in excess of 20,000 rupees in cash.”ALSO READ | Hero MotoCorp shares surge 6% after Q4 results. Should you buy, sell or hold?Earlier in March, the central bank had also prohibited IIFL Finance from disbursing gold loans, for the violation of cash disbursal norms, among other issues.George Alexander of Muthoot Finance stated that the bank does not see the advisory as a challenge as they do not foresee any customer denying loan disbursement directly into their bank accounts.

There will be no loss in the number of customers as the management is 100% confident that the central bank’s new norms will not impact Muthoot volumes, Alexander further stated.

Recently, Muthoot Finance’s microfinance arm, Belstar Microfinance, filed preliminary papers with capital markets regulator SEBI to raise Rs 1,300 crore through an initial public offering (IPO), while Manappuram’s subsidiary Asirvad Micro Finance also got a nod from SEBI to raise funds through an IPO in the last month.

The shares of Manappuram have gained 45.5% in the last one year while Muthoot has increased by 48% in the same period.

Also read: L&T shares fall 6% as brokerages cut target prices after Q4 results. Should you buy or sell?

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