The Reserve Bank of India on Tuesday rejected Kerala-based Muthoot Finance's proposal to acquire IDBI Mutual Fund, which would have allowed the Kerala-based company to enter into the mutual fund asset management space.

Muthoot Finance said its request for a no objection certificate was not acceded to by RBI on the ground that, "the activity of sponsoring a Mutual Fund or owning an asset management company (AMC) is not in consonance with the activity of an operating NBFC".

On 22 November 2019, Muthoot Finance Ltd, a gold loan non-banking financial company (NBFC), had signed a share purchase agreement to acquire IDBI Asset Management Ltd and IDBI MF Trustee Company for a consideration of around Rs 215 crore.

Promoted by IDBI Bank, IDBI Mutual Fund is a profit making AMC. It managed 22 schemes during FY20, comprising 12 equity fund schemes, six debt fund schemes, two hybrid fund schemes and one each Gold Fund of Funds and Gold Exchange Traded Funds scheme

On Monday, Moody's Investors Service said Muthoot Finance's focus on gold loans will be of help for its asset quality. The global ratings agency pointed out that it does not foresee a drop in gold prices-the biggest risks while lending against the precious metal.