The Reserve Bank of India (RBI) has allowed gold-loan non-banking financial companies (NBFCs) to open branches freely without prior regulatory approval, a move that is set to benefit large players like Muthoot Finance and Manappuram Finance.

Under the new easing framework, gold-loan NBFCs do not require a regulatory nod to open more than 1,000 branches. By aligning regulatory treatment across the sector, it will help these NBFCs to pursue scalability plans with ease. 

Industry experts said this would speed up expansion plans of such NBFCs by easing operational constraints. It would also remove a regulatory disadvantage these gold-loan NBFCs faced versus their diversified peers without disturbing their specialised business model.

The current system mandates gold-loan NBFCs to obtain RBI approval to expand beyond 1,000 branches, forcing a delay and additional compliance requirements. Large players with aggressive branch rollout plans have seen this as a bottleneck for their accelerating designs.

Diversified NBFCs, freed from similar restrictions, have been at a distinct advantage and the level playing field has been distorted. 

How Muthoot and Manappuram will gain

Large players like Muthoot and Manappuram have more than 1,000 branches and are gainers of the RBI’s new framework.

While Muthoot Finance has 4,967 gold loan branches, Manappuram Finance runs 4,044 branches. Now they may not face procedural delays in their branch expansion plans, with gold loan demand remaining high and branch-led sourcing critical for customer acquisition.