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Gold loan companies are reaping the benefits of lower cost of funding as banks have been cutting their lending rates in the last few months.
Since the start of this fiscal, banks have cut their base rate or the minimum rate at which they grant loans by up to 30 basis points.
“When it comes to funding, we borrow about 75% through banks and the remaining from the market. Since we borrow more from banks our cost of borrowing has been coming down for new loans from 12.75% last fiscal to 10.50% currently. It may come down further with banks cutting their lending rates,” said Kapil Krishan, group CFO of Manappuram Finance.
In the recent past borrowing from the market had become a bit expensive due to rising yields. Banks began cutting their lending rates from April after the Reserve Bank of India (RBI) nudged them to do so. Since the start of 2015, RBI has cut the repo rate or the rate at which banks borrow from the central bank by 75 basis points to 7.25%.
“As and when our lending increases, we will go for more of bank borrowing because we are expecting the lending rates to come down further. In the last one year our cost of borrowing have come down by 1%. We borrow 50% from banks and 50% from market,” said K R Bijimon, chief general manager (finance) of Muthoot Finance.
