Private sector NBFC Magma Fincorp expects that its newly launched gold loan business will contribute around 3-4 per cent of the total earnings in the next three years,a top company official has said.
“We expect that gold loan business will contribute around 3-4 per cent of the total business in the next three years,” Magma Fincorp chief financial officer V Lakshmi Narasimhan said.
He also said the company is witnessing sound demand for its gold loan products after its launch in the first quarter of current financial year.
The Kolkata-based non-banking finance company,which operates over 200 branches in the country,has started providing gold loan products in two metros in its first phase of operation.
“We have started offering these products in Kolkata and Mumbai in the first phase,” Narasimhan said adding that the future branch expansion will depend on the business
Referring to Reserve Bank’s restriction on loan to value ratio not exceeding 60 per cent for NBFCs,he said though this is a limiting factor,it will not hamper the
business growth in this segment for the company.
Earlier,RBI had directed all NBFCs engaged in gold loan business to maintain a loan to value ratio of 60 per cent in order to avoid any systemic risk in case of sharp fall in
gold prices. This means if the borrower pledges Rs 100 worth gold jewellery,he will get upto Rs 60 of loan against the asset.
The company nearly doubled its net profit to Rs 31.05 crore for the first-quarter compared to Rs 16.38 crore in the same period last fiscal.
Total income from operations increased by 53 per cent to Rs 325.24 crore in first quarter of FY13 against Rs 211.74 crore in the corresponding quarter last fiscal.
Magma Fincorp had an assets under management of Rs 13,750 crore by the end of first quarter.