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INTRODUCTION

Every modern economy is based on a sound financial system a financial system. a set off

institutional arrangements through which financial surpluses are mobilized from the unit

generating surplus income and transferring them to the others in need of them. The activities

which include production, distribution, exchange and holding of financial assets instruments of

different kinds by financial institutions, banks and other intermediaries, of other market. Among

these organizations, are banks, credit card companies, insurance companies, consumer finance

companies, stock brokerages, investment funds and some government sponsored enterprises?

The financial markets have two major components; they are money market and capital market.

Money market

The money market refers to the market where borrowers and lenders exchange short-term funds

to solve their liquidity needs.

Capital market

The capital market is a market for financial investments that are direct or indirect claims to

capital.

Securities market

It refers to the markets for those financial instruments claims obligations that are commonly and

readily transferable by sale. It has two inter dependent and inseparable segments the new issues

(primary) market and the stock (secondary) market. the secondary market enables those who

hold securities to adjust their holdings in response to changes on their assessment of risk and

return. The primary markets provide the channel of sale of new securities.

Stock market

A stock market, or equity market, is a private or public. Market for the trading of company stock

and derivatives at an agreed price, these are securities listed on a stock exchange as well as those

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only traded privately. The size of the world stock market is estimated at about $36.6 trillion us at

the beginning of october2008

FOREX MARKET

The foreign exchange market (currency, forex , or FX) market is where currency trading takes

place .it is where banks and other official institutions facilitate the buying and selling of foreign

currencies . The FX market is one of the largest and most liquid financial markets in the world,

and includes trading between large banks, central banks, currency speculators , corporations,

governments, and other institutions.

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What is Gold Loan?

As the name suggest its loan against Gold. It’s the most convenient way to receive cash in no

time from any NBFC/Bank by pledging your Gold ornaments/Coins/bars/Exchange traded funds

ETFs/ SBI gold certificates etc., this is one loan product which comes with minimal

documentation & no processing time in short its over the counter product. 

Product is designed in a way it ensures hassle free process for the customer & loan availed can

be put to any use. 

Loan amount eligibility is evaluated basis on the Gold value banks usually fund 70-80% of the

gold market value & on repayment of the loan gold deposits are returned back to the customer. 

This loan comes much cheaper than personal loan as it’s a secured product & rate of interest

ranges between 11.5-24% per annum. 

Rate of interest is decided on two factors risk criteria ( What % of market value of Gold you are

availing loan if its 90% of the Gold market value then interest charged will be higher & vice a

versa for lower loan amount as compared to gold value) & customer relationship with the bank. 

Features of Gold Loan:

• Fastest loan disbursal

• Most convenient way to arrange funds

• Low Documentation

• No pre-payment charges

• No loan amount cap (you can avail as low as 10,000)

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INDUSTRY PROFIILE

FINANCIAL SERVICES INDUSTRY

There is a potential source of confusion regarding careers in finance. On the one hand, there is a

function called finance that is common to all business enterprises, in every industry. On the other

hand, there is a financial services industry. The primary focus of this guide site is on the latter

definition. Additionally, note that the finance function is but one of many possible career paths

within the financial services industry.

INDIA'S FINANCIAL SERVICES INDUSTRY

An innovative, competitive and thriving financial services industry in any country plays a vital

role in its smooth functioning and development. India's financial services sector has posited a

stable growth curve over the years driven by sound fundamentals, rising personal incomes

corporate restructuring, financial sector liberalization and the growth of a consumer-oriented,

credit-oriented culture. This has led to the increasing demand for financial products, including

consumer loans (especially for cars and homes), as well as for insurance and pension products.

The soaring demand for financial services offers promising investment prospects.

According to the Central Statistical Organization (CSO) data, released early this year, financial

services, banking, insurance and real estate sectors rose by 9.7 % 2009-10.

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BACKED WITH

A favorable demographic profile which supports a higher retail offtake - 54% of the population

is in the 15-35 years age group. India consists of a dynamic and a growing middle-class class

which on a purchasing power parity basis is much larger than the entire population of the US and

a consumer credit market that is growing by more than 40% per annum.

Continuous increasing in capital expenditure by the government and private industry.

Significant opportunities in the largely untapped SME segment- which accounts for 40% of the

industrial output and 35% of India's direct exports.

India's increasing and consistent growth. As per the CSO, the Indian economy grew by an

estimate of 7.4 per cent in the year 2009-10 and is expected to grow over 8 percent in the coming

months.

Growing investment avenues across all segments in the banking and financial services sector.

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FINANCIAL SERVICES INDUSTRY’S GROWTH POTENTIAL

The financial industry, or financial services industry, includes a wide range of companies and

institutions involved with money, including businesses providing money management, lending,

investing, and insuring and securities issuance and trading services. The following institutions

are a part of the financial industry:

• Banks

• Non Banking Financial Institution

• Credit card issuers

• Insurance companies

• Investment bankers

• Securities traders

• Financial planners

• Security exchanges

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FINANCIAL INDUSTRY: DEMAND AND SUPPLY DRIVERS

Demands for financial products are driven by risk-reward assessments, which consider:

• Potential Yield

• Risk rating

• Liquidity

• Availability of information

• Access to alternatives

The major supply drivers are:

• Money supply

• Interest rates

• Inflation

• Economic conditions

• Government regulations

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FINANCIAL INDUSTRY: MAJOR PLAYERS

According to the Global 2000 (annual report by Forbes), seven of the world’s top 10 companies

belonged to the financial industry. These included Citigroup, Bank of America, HSBC

Holdings and JPMorgan Chase. Their combined revenues in 2007 were worth $645 billion,

down from the 2006 high of $785 billion.

According to the Fortune 500 rankings, in 2006 financial services generated $257 billion in

profits, a third of total Fortune 500 profits. In 2008, however, they lost a staggering $213 billion,

a total swing of $470 billion. Big players on the list, such as Citigroup and Bank of America,

may only be alive today thanks to government money.

The finance industry is an industry in itself as well as an ancillary that supports other industries.

Trade and commerce across the world would come to a standstill if there was no means to fund,

pay and protect the transactions, hence the need for governments to support the financial services

industry when companies that are ‘too big to fail’ are close to collapse.

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COMPANY PROFILE

MUTHOOT FINANCE LTD.

Muthoot Finance Ltd. is the largest player in the gold loan business in India. 76% of its business

is generated from the 5 southern states in the Country. The Company has a market share of

19.5% in the organized sector as on FY10. It is facing major legal hurdle related to Kerala State

Money lender Act which, if implemented will substantially reduce the profitability of the

Company as Kerala accounts to 24% of Company’s business. Moreover, there is a good

probability for gold price to get corrected after this prolonged bull run which may reduce the

ticket size of the loans, leading to a drop in growth and associated profitability. We are quite

bullish on the growth potential of this firm but we would like to avoid the scrip until the

abovementioned factors are sorted out and the scrip is available at a deep discount.

INTRODUCTION OF THE MUTHOOT FINANCE LTD

Incorporated in 1997, Muthoot Finance Ltd. is India’s largest gold loan Company. It is a

subsidiary of Muthoot Group which is headquartered at Kochi, India. It provides personal and

business loans secured by gold jewellery, or Gold Loans, primarily to individuals who possess

gold jewellery but could not access formal credit within a reasonable time, or to whom credit

may not be available at all, to meet unanticipated or other short-term liquidity requirements. It

has the largest branch network among gold loan providers in India with 1921 branches and a

strong presence in the underserved rural and semi-urban markets. In 2010, it received a fund

infusion of Rs.250 cr. from MUTHOOT FINANCE LTD private equity players like Baring India

Private Equity, Matrix Partners India, Kotak India Private Equity Fund and well come Trust for a

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6% stake in the Company. In 2011, well comes Trust picked up an additional 1% stake from the

promoters, taking the total stake of private equity investors to 7%.

HISTORY - MUTHOOT FINANCE LTD

Our Company was originally incorporated as a private limited company on March 14, 1997 with

the name “The Muthoot Finance Private Limited” under the Companies Act. Subsequently, by

fresh certificate of incorporation dated May 16, 2007, our name was changed to “Muthoot

Finance Private Limited”. The Company was converted into a public limited company on

November 18, 2008 with the name “Muthoot Finance Limited” and received a fresh certificate of

incorporation consequent upon change in status on December 02, 2008 from the RoC.

Merger with Muthoot Enterprises Private Limited Our Company, along with Muthoot

Enterprises Private Limited, filed a composite scheme of arrangement bearing C.P. Nos. 48 and

50 of 2004 under the Companies Act before the High Court of Kerala (“Scheme of

Amalgamation”). The Scheme of Amalgamation was approved by the board of directors of our

Company through the board resolution dated April 28, 2004.

Pursuant to the approval of the Scheme of Amalgamation by the High Court of Kerala by an

order dated January 31, 2005, Muthoot Enterprises Private Limited was merged with our

Company, with effect from March 22, 2005 and the High Court of Kerala had instructed all the

parties to comply with the statutory and other legal requirements to make the Scheme of

Amalgamation effective.

The company on March 22, 2005 filed a certified copy of the order of the High Court of Kerala

with the RoC. With the successful implementation of the Scheme of Amalgamation, the

undertaking of Muthoot Enterprises Private Limited along with its assets and liabilities was

transferred to and vested in our Company.

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KEY EVENTS, MILESTONES AND ACHIEVEMENTS YEAR

1. 2001 RBI license obtained to function as an NBFC.

2. 2004 Obtained highest rating of F1 from Fitch Ratings for short term debt of Rs. 200 million.

3. 2005 Retail loan and debenture portfolio of the Company exceeds Rs. 500 million. 4. Merger

of Muthoot Enterprises Private Limited with the Company

5. 2006 F1 rating obtained from Fitch Ratings affirmed with an enhanced short term debt of Rs.

400 million.

6. 2007 Retail loan portfolio of the Company crosses Rs. 10 billion.

7. RBI accords status of Systemically Important ND-NBFC.

8. Branch network of the Company crosses 500 branches.

9. Net owned funds of the Company crosses Rs. 1 billion.

10. 2008 Net owned funds of the Company crosses Rs. 2 billion.

11. Retail loan and debenture portfolio crosses Rs. 20 billion and Rs. 10 billion respectively. 12.

F1 rating obtained from Fitch Ratings affirmed with an enhanced short term debt of Rs. 800

million.

13. Overall credit limits from lending banks crosses Rs. 5 billion.

14. Conversion of the Company into a public limited company.

15. Fresh RBI license obtained to function as an NBFC without accepting public deposits,

consequent to change in name.

16. 2009 Retail loan and debenture portfolio crosses Rs. 30 billion and Rs. 15 billion

respectively.

17. Net owned funds of the Company crosses Rs. 3 billion.

18. Gross annual income crosses Rs. 5 billion.

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19. Overall credit limits from lending banks crosses Rs. 10 billion.

20. 2010 Retail loan and debenture portfolio crosses Rs. 50 billion and Rs. 20 billion

respectively.

21. Net owned funds of the Company crosses Rs. 4 billion.

22. Overall credit limits from lending banks crosses Rs. 20 billion.

23. ICRA assigns ‘A1+’ rating for short term debt of Rs. 2 billion.

24. CRISIL assigns ‘P1+’ rating for short term debt of Rs. 4 billion.

25. Branch network of the Company crosses 1,000 branches.

26. Demerger of the FM radio business into Muthoot Broadcasting Private Limited.

27. Private equity investment of an aggregate of Rs. 1,575.45 million from Matrix Partners India

Investments, LLC and Baring India Private Equity Fund III Limited.

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BACKGROUND - MUTHOOT FINANCE LTD

Muthoot finance is a flagship company of the Muthoot Group based in Southern India. The

group has a presence in diverse businesses including financing, healthcare, real estate, education,

hospitality, forex, wealth management services, money transfer services, power generation and

entertainment.

Muthoot Finance Ltd (MFL), incorporated in 1997, is the Kerala based largest gold financing

company in India in terms of loan portfolio. The company offers gold loan to individuals like

small businessmen, vendors, traders, and salaried individuals who cannot access formal credit for

reasons like lack of credit history, documentation, accessibility. The company generally gives

small ticket loans (average ticket size of ~`31000) with a tenor not exceeding one year, thereby

limiting interest risk and asset-quality concerns. The loan-to-value varies from 60%-85%.

Muthoot Finance Gold Loan portfolio as of November 30, 2010 comprised approximately 4.1

mn loan accounts in India which it serviced through 2263 branches across 20 states. The

company has further increased its branch network to 2611 branches as of February 28, 2011,

servicing an average of 67,953 customers per day in the month of February 2011. As of February

28, 2011, the company has employed 15,664 persons. Other then Gold Loans business, the

company provides money transfer services through their branches as sub-agents of various

registered money transfer agencies.

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PRODUCT AND SERVICES OF THE MUTHOOT FINANCE

1. GOLD LOAN

Muthoot Finance, India’s largest gold loan company is the first choice of Indians who want to

make their dream a reality. May the dream be to start their own business or to buy their own

home, for over 124 years Muthoot Finance has helped almost every Indian’s dream come true.

Trusted by over 70000 customers every day, Muthoot Finance Gold Loan has services and

products that fit the need of any customer, making it the quickest, most convenient and safest

way to take a gold loan.

Key features of Gold Loan:

Loan disbursal in 5 minutes

Loans starts from 1,500 to 1 Crore

Minimal documentation and credit assessment requirements

High quality customer service in short response time

Evaluation of gold ornaments takes place in house.

Safety of Gold Ornaments: All branches as equipped with Strong Rooms for keeping safe

custody of Gold Ornaments

Gold Loan available at over 3,000 Muthoot Finance branches across India

0% processing fees

Pre-payment option-without any penalty

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GOLD LOAN SCHEMES

Rs. 2,155/-

Scheme Name Value (per gram) Interest (% p.a.)

True Value Personal Loan (TPL) Rs. 1,035/- 12%

Super Value Personal Loan (SPL) Rs. 2,260/- 24%

Real Value Personal Loan (RPL) Rs 1,960/- 18%

Express Personal Loan (XPL) Rs. 2,090/- 21%

2. GOLD COINS

Now invest your wealth in the ever rising power of Gold with the Muthoot Precious Metals

Corporation. 24 carat Pure Gold Coins: Muthoot Precious Metals Corporation presents Gold

Coins with 999% purity (24 Carat). Invest in safe, secure and profitable Gold Coins.

The Gold Coins hold many advantages:

999% pure

Finance schemes with easy monthly installments

Appreciating asset

Higher return on investment with no risks

Available in denominations such as 2g, 4g, 8g, 20g and 50g to suit every pocket.

The ideal gift for your near and dear ones

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Silver Coins

999% pure Silver Coins

One of India's few financial players that deals in Silver Coins

Available in 50 gm and 100 gm

Available at over3, 000 Muthoot Finance brances across India

3. MONEY TRANSFER

One of the finest Money Transfer services in India, with over 700,000 transfers annually,

Muthoot Money Transfer is the largest payout centre in India. Muthoot Money Transfer allows

real time money transfers from across the seas, with the money reaching the receiver in less than

10 minutes. The money can be transferred from First Remit/Coinstar, Xpress Money, Ez Remit,

Money Gram, Royar Money, Global Money Transfer, Western Union, Transfast, Instant Cash

and even Muthoot Finance’s own branches abroad. The service boasts low costs, high exchange

rates and NO additional service charge to the receiver.

The key highlights of this service are:

Fastest Money Transfer facility

No bank account needed for amounts up to Rs. 50,000

The receiver does not have to pay any service charge

Certified by the RBI

Access it in any of the 3000 branches across the country

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4. FOREIGN EXCHANGE

Muthoot Foreign Exchange offers you currency exchange facilities as well as allows you to buy

and sell foreign currency and Traveller’s cheques with Muthoot Foreign Exchange service. With

the wide network of almost 3000 branches, we ensure ease of transaction. Muthoot Foreign

Exchange helps you get competitive rates for all currencies and notes in 35 major currencies as

well as 100 miscellaneous ones!

A few features of our Foreign Exchange service:

Buying and selling of all major Traveller’s cheques and Travel Cards

Commission free encashment of Traveller’s cheques

Competitive rates for all currencies

Remittance of funds abroad for various purposes

5. MPOWER CARD

Your life is made infinitely easier with the Muthoot MPower Card, which is a unique identity

card with numerous benefits:

Access it anywhere in India

Earn Loyalty Points on every transaction at ANY Muthoot branch

Redeem these Loyalty Points for attractive gifts

Get Rs. 20 per gram extra on Gold Loan

Keep all your jewelry in our lockers free of cost (No locker charges!)

Rs. 50,000 Personal Accident Insurance coverage

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Deposit and withdraw money from any branch on Real Time

Special overdraft scheme for MPower Cardholders.

6. TRAVEL SMART

Within just a few months of its launch Muthoot Travel smart has already become one of the

leading IATA (International Air Transport Association) accredited agencies and has got certified

by IRCTC. Muthoot Travel smart offers all the services of a travel agency and more, such as

travel insurance and foreign exchange Muthoot Travel smart carries forward the group’s core

values of helping India make the right decision with their money by helping you during your

travels, both familial and official. In addition to the 3000 branches of Muthoot Finance in India,

the services of Muthoot Travel smart can be accessed in 6 offices overseas as well.

The services offered under Travel smart include:

International & Domestic Ticketing

Railway Ticketing

Tours

Passport, Emigration & Visa

Travel Insurance

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VALUE ADDITION IN PRODUCT AND SERVICES OF THE MUTHOOT FINANCE

LTD

We have challenged ourselves to perform better than the best. We have now launched a new

venture in Gold Financing, offering Customers loan against the security of Gold Exchange

Traded Funds (ETFs) units. This will not only add value to the services but also enable the

Company to service financial requirements of new Customer segment.

The visionary zeal, constant innovation and customer-oriented product & service delivery

deployed at every phase of its growth are indeed exemplary. And Muthoot Group is now all set

to go places, backed by its assets built by extraordinary people and high values.

With the guiding principles of honesty, sincerity, confidence and service, Muthoot Group has

indeed come a long way. These values continue to drive all business decisions of the Group

Companies. With customer-centric products and services to offer, the Group has been constantly

innovating and evolving to deliver superior products, transparent workplace practices, easy

accessibility and personalized services at all levels. Perhaps why, Muthoot Group has earned the

trust of millions of customers and associates across the country.

1. Muthoot Finance launches new gold loan scheme

Indian non-banking finance company (NBFC) Muthoot Finance Ltd Friday announced the

launch of a new gold loan scheme that will provide loans to public against the security of Gold

Exchange Traded Fund (ETF) across the country.

The new scheme – Gold ETF Loan Scheme – which will be made available to the customers by

July-end 2011 will help customers get loan against their Gold ETF units to the extent of 85% of

the net asset value (NAV) of ETFs, said a press release issued by Muthoot Finance.

Gold ETFs are mutual fund units issued by Asset Management Companies against 995 purity

physical gold. They are listed and traded on stock exchanges and can be bought and sold like

stocks on a real-time basis. Gold ETFs were valued at Rs 50 billion as of June 2011.

“Loan against Gold ETF is a scheme through which Muthoot Finance plans to venture into

totally new segment of gold financing which would not only add value but also enable the

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company to service the financial requirements of newer customer segments,” said George

Alexander Muthoot, managing director of Muthoot Finance during the launch.

2. MUTHOOT FINANCE LAUNCHES THE WESTERN UNION® MONEY

TRANSFERSM SERVICE:

May 27, 2011, Kochi, India: International money transfer consumers across Kerala - India’s

foremost remittance driven economy will now be able to receive their Western Union® Money

TransferSM transactions from Muthoot Finance - a leading Kerala based financial institution.

Muthoot Finance will now offer Western Union Money Transfer services from its countrywide

network of 2800 locations linking them to Western Union’s network of more than 400,000

locations in over 200 countries and territories across the world.

Launching the service, Mr George Alexander Muthoot – Managing Director, Muthoot Finance

Ltd said, “Here, on this occasion, three of the biggest players of the Indian Financial Services

industry have come together with the intention of providing a premium money transfer service to

customers across the country”.

Muthoot Finance Ltd., through its extensive network of branches, aims to capitalize the huge

potential of the money transfer business in India.

“With its expansive global network, Western Union is uniquely positioned to deliver fast,

reliable and convenient money transfer services to consumers across remote geographical

locations globally.

“Through our agreement with Western Union we have facilitated a number of classes of trade

including retail and banks to offer Western Union® Money TransferSM services to the remotest

corners of India. The collaboration with Muthoot Finance is one more step in this direction

which would positively impact people across the 2,800 branches offering the service,”

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Manappuram Finance Ltd

Manappuram Finance Ltd (BSE: 531213) or MAFIL is a non-banking financial company

(NBFCs) situated in Valapad, Thrissur, Kerala state. Manappuram has over 3200+ branches

across 25 states, a staff strength of over 15,000+ people.

History

The company was founded in 1949 by late V.C. Padmanabhan in Thrissur District. The company

commenced its operations at Valapad, mainly with money lending activity on a very modest

scale. The group's flag-ship company, MAGFIL, was established in 1992 in the wake of

economic reforms launched by the Government of India. Manappuram's origins go back to 1949

when it was founded in Valapad (a coastal village in the Thrissur District of Kerala) by the late

V.C. Padmanabhan, father of Nandakumar. Its activity was mainly pawn broking and money

lending carried out on a modest scale.

The expansion

Shri Nandakumar took over the reins of this one Branch business in the year 1986 when his

father expired. Since then, it has been a story of unparalleled growth, with new milestones being

crossed every year. Manappuram Finance Ltd. was incorporated in 1992 (the original name was

Manappuram General Finance and Leasing Limited) with its registered office at Valapad, in the

Thrissur District of Kerala. It is India's first listed and highest credit rated gold loan company and

widely recognised as a leading wealth creator in the Indian stock market. Since inception, the

Company has maintained a consistently rapid pace of growth. Today, it has around 3000

branches across 26 states and UTs with Assets under Management (AUM) of about Rs.11,600

crores, a workforce of about 22,000 and a live customer base of 16 lakhs (Data as of 31 March,

2012).

Soon after it commenced its operations, Manappuram Finance Limited gathered several "firsts"

to its credit. The company was the First NBFC in Kerala to receive a Certificate of Registration

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issued by the RBI. It was the first Kerala based NBFC to get a Credit Rating in 1995 of "MA"

(current rating MA+) from ICRA, recognising the company's ability to make timely repayments

of the principal and interest under its then existing public deposits programme. Manappuram

Finance was one of the very first NBFCs from Kerala to go for a Public Issue of its shares in

1995. In fact, the company has been consistently making profits and consistently paying

dividends from the very first full year of operations.

The company was also the first NBFC from Kerala to issue bonus shares in the ratio of 1:1 in

2007 and then, repeat the feat twice, in 2010 and in 2011 (making it three such instances in five

years). Moreover, in 2007, Manappuram Finance Ltd became the first Kerala based NBFC to

receive foreign Investment from FIIs, and also get the highest short term credit rating of A1+

from ICRA. In 2010, it became the very first Kerala-based company to offer ESOPs (Employee

Stock Option Plan) to its middle and senior management functionaries. In April 2011, it became

only the second listed company from Kerala to have its shares traded in the "A-Group" at the

Bombay stock exchange.

Other activities

As part of its diversification, Manappuram Finance Limited has also ventured into the Foreign

Exchange business with the Reserve Bank of India having granted an Authorised Dealer - II

licence to the Company which permits it to effect outward remittances for a variety of purposes

such as overseas medical treatment, higher education abroad, business travel, conferences etc.

The Company has also commenced Instant Money Transfer in collaboration with UAE Xchange,

Wallstreet and MoneyGram.

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Management Team

Mr. Jagdish R. Capoor, Non-Executive Chairman

Mr. Jagdish R. Capoor is a former Deputy Governor of Reserve Bank of India. He has been the

Chairman of Agricultural Finance Corporation Ltd and Assets Care Enterprise Ltd; Chairman of

HDFC Bank, Chairman of BSE Ltd, Chairman of Deposit Insurance and Credit Guarantee

Corporation, Chairman of Bharatiya Reserve Bank Note Mudran Ltd, Additional Director of

Entegra, Director of The Indian Hotels Company Limited, Director of Vikas GlobalOne Limited,

Director of Agricultural Finance Corporation, and Assets Care Enterprise Limited. He also

serves on the Boards of the LIC Pension Fund Ltd., Quantum Trustee Co. Pvt. Ltd, LIC Housing

Finance Ltd. He is on the Board of Governors of Indian Institute of Management Indore. Jagdish

Capoor has been a Director of Manappuram Finance Ltd. since July 20, 2010.

V.P. Nandakumar, Managing Director & CEO

Mr. V.P. Nandakumar is a post graduate in science with additional qualifications in Banking &

Foreign Trade. Immediately after completion of his education, he joined the erstwhile Nedungadi

Bank Limited. In 1986, after 10 years of service as an officer of the Nedungadi Bank, he

resigned from the Bank to take over the family business, upon the demise of his father, and the

founder of Manappuram Mr. V.C. Padmanabhan.

Mr. I. Unnikrishnan, Executive Director & Deputy CEO

Mr. I. Unnikrishnan is a Chartered Accountant from Thrissur.

Mr. B.N. Raveendrababu, Executive Director

Mr. B.N. Raveendra Babu, is a Post Graduate in Commerce with additional qualification in

Management Accounting from the U.K. Prior to joining Manappuram Group, Mr. Raveendra

Babu occupied senior positions in Finance and Accounts in various organizations in the Middle

East.

Mr. A.R. Sankaranarayanan IRS (Retd)

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Mr. A.R. Sankaranarayanan is an IRS (Retired). He has adorned several important positions in

and outside the Govt such as MD, SAIL International Ltd, Director of Prime Minister`s

Secretariate and former Director of Federal Bank Ltd. At present he is the General Manager of

Kottakkal Arya Vaidya Sala.

Mr. P. Manomohanan

Mr. Manomohanan is a Central Banker with a professional qualification in Banking. He has got

over 38 years of experience in Banking including Directorships in the South Indian Bank Ltd and

the Federal Bank Ltd. He retired as the General Manager, Reserve Bank of India, Department of

Banking Supervision, Trivandrum.

On Feb 7, 2012, the Reserve Bank of India (RBI) has issued a warning to the general public

against placing deposits with Manappuram Finance or a group company. The central bank has

said that acceptance of deposits either by Manappuram Finance or by Manappuram Agro Farms

(MAGRO ) is punishable with imprisonment. Shares of the company plunged 20% following this

news.

On Feb 14, 2012, The company announced an immediate compliance to any of RBI's concerns.

To enhance governance and better manage growth to the next level, the Board also decided to

constitute an independent committee under the chairmanship of Mr Jagdish Capoor (former

Deputy Governor of RBI and former Chairman of HDFC Bank). This committee will review

relevant aspects of operations, systems, controls and organizational structure, including Board

composition and effectiveness.

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THEORETICAL BACKGROUND

Gold is a brilliant yellow precious metal that is resistant to air and water corrosion. It is a very

soft and pure metal. Gold is the most malleable and ductile metal found on earth. That’s why it is

expensive and it is alloyed with other metals, usually copper and silver to make it less expensive

and harder, a karat is the unit that measures the purity of gold jewellery or else it is hallmarked

with a three digit number that indicates the parts per thousand of gold. Some countries hallmark

gold with a three digit number that indicates the parts per thousand of gold. The alloyed gold

comes in many colours and may not be bright yellow all the time. It has long been a values

commodity, particularly in India where it is considered auspicious, and had been in use for

centuries in the form of jewellery, coins, bullions, electronics, and dentistry, also for other

medical purposes. Though gold is a highly liquid asset, it wasn’t until recently that consumers

leveraged it effectively to meet their liquidity needs.

Lenders provide loans by securing gold assets as collateral. Compared with the rest of the world

in India the gold loan market is big business. Until a decade back, most of the lending was in the

unorganized sector through pawnbrokers and money lenders. However this scenario changed

with the entrance of organized sector players such as banks and non banking finance companies

(NBFCs) which now command more than 25% of the market. The organized

gold loan market has grown at 40% CAGR form 2002 to 2010. NBFCs have been a major

driving force behind this growth given their extensive network. Faster turnaround time, higher

loan to value ratios and the ability to serve non-bankable customers. Of late, banks have

improved their gold loan product features and services.Coupled with comparatively lower

interest rates charges, bank stand to gain market share at the expanses of NBFCs in the near

future.

The eligibility criteria required to apply for gold lone in India includes three factors. Firs-tly, the

person has to be above 18 years of age. Secondly, the person applying or a gold loan in india

should have a ID & address proof and last but not the least the applicant should be working on a

regular salary basis , means there should be a constant flow of income.

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BACKGROUND: GOLD AND THE INDIAN SOCIETY

Gold has traditionally been among the most liquid asset and is an accepted universal currency. it

has traditionally been consumed by individuals in the form of jewellery, especially in India were

it is considered auspicious. Gold is presumed to be a safe haven in times of economic

uncertainty, a fact exemplified by a 30% increases the value of gold over the past year India is

one of the largest market of gold accounting for approximately 10% of the total world gold stock

as of 2010. Rural India accounts for 65% of this gold stock. Though gold price have increased

19% CAGR from 2002 to 2010, gold stock in India has grown at 22% CAGR During the same

period to 18000 tons (Rs.32000 billion). The demand for gold has followed a regional trend with

southern India accounting for 40% of annual demand, followed by the west (25%), north (20-

25%) and east (10-15%).

Looking for Gold Loan Market

Major Players

The Key Players in the Indian gold loan market include the unorganized sector, banks _

public/private/cooperatives and NBFCs. While the unorganised sector, comprising local

pawnbroker and money leader has traditionally dominated the gold loan market for money

decades and still commands nearly 75% of the market the organized sector led by NBFCs is

catching up fast. The organized sector has grown at a rapid paces of 40% CAGR form the 2002

to 2010 and is expected to grow by 33% to41% CAGR in 2011

And in doing so these companies are challenges the dominance of the large unorganised sector

within the organized sector, NBFCs have grown at a repaid rate from 18.4% in FY to 32.2% in

FY10. (Source: cognizant 20-20 insight jan.2012)

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Muthoot finance

With a tagline loan in just 5 minutes muthoot fiancés is a India’s largest gold loan company & is

the fast choice of Indian who want to make their dream a reality. May the dream be to start their

own business or to buy their own home: muthoot finance has helped almost every Indians dream

come true, trusted by over 76000 customer every day muthoot finance gold loan has services and

products that fit the need of any customers , making it the quickest ,most convenient and safest

way to take gold loan

Headquartered in the southern Indian state of Kerala, their operating history has evolved over a

period of 72 since M George muthoot (the father of our promoter) founder a gold loan business

in 1939 under the heritage of a treading business established by his father, ninan mathai muthoot

in 1987. since our formation, we have broadened the scale and geographic scope of their retail

leading operation so

that, as of march 31, 2008, 2009, 2010, 2011 and in the period ended September 30, 2011

revenue from their gold loan business constituted 95.97% 96.71% 98.08% 98.75% and 99.01%

respectively , of their total income,

Manappuram

Manappuram group was founded by late Mr. V. C. Padmanabhan many decades ago currently

managed by his son Mr. V. P. Nandakumar, executive chairman of manappuram general finance

& ltd (“manappuram” or MAGFIL) manappuram, registered as a deposit taking NBFC is the

flagship company of manappuram group

Headquartered in the state of Kerala in southern India is the largest listed gold loan company in

India. Primarily engaged in providing loans against household used jewellery pledged by its

customer’s. Amongst the safest form of asset lending, with both physical custody and beneficial

ownership with the lender.

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MUTHOT FINCORP

Muthoot fincorp limited, the flagship company of the Muthoot pappachan group (MGP), is a

finance company that caters to the financial needs of retail and institutional customers. They are

registered with the reserve bank of India as a systemically important non deposit taking non

banking finance company (NBFC) with a paid up capital of Rs 181.25 cores and a net owned

fund of Rs 824.00 corers as on 31. 12. 2011 Muthoot fincorp limited has wide network of over

2200 branches (as on 31/3/2012) and expanding more.

KARVY FINANCE

KARVY, the parent group is one of India’s largest integrated financial services providers with a

25+ year operating history. KARVY covers the entire spectrum of financial services providers

with a stock

broking. Commodities broking / finance registry services depository services merchant banking

& corporate finance IPO distribution investment banking realty services insurance broking /

distribution and distribution of financial products like mutual funds bonds personal finance

advisory services BPO / technology services wealth management and loans KARVY has pan

India personal with over 575 offices in 375 locations across India and overseas at Dubai and

New York and has over 9000 highly qualified staff. Keeping in line with KARVY credo to be a

leading and preferred financial services provider the focus of KARVY finance will be to provide

the complete spectrum of financial services products to their customers and build a strong

nationwide distribution footprint to emerges as the leader in capital markets and retail finance in

India

Their niche lies in the fulfilment of customers financial needs at all stages of their life by making

possible simple and flexible financial solutions tailor made to suit customers requirements

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INDIA INFOLINE

The MUTHOOT AND MANAPPURAM (India Info line) group, comprising the holding

company, India Infoline Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of

India’s premier providers of financial services. MUTHOOT AND MANAPPURAM offers

advice and execution platform for the entire range of financial services covering products

ranging from Equities and derivatives, Commodities, Wealth management, Asset management,

Insurance, Fixed deposits, Loans, Investment Banking, Gold bonds and other small savings

instruments.

Process for availing Gold Loan :

• It’s a four step process:

• Loan Valuation: Banks carries out valuation of Gold & decides on the

loan amount eligibility.

• Documentation: Usually banks/NBFC takes photo id & residence proof of the applicant.

• Signing of Agreement: Terms & condition of the loan are signed by the loan applicant.

• Loan Disbursement: Cheque is handed over to the customer over the counter after signing

agreement at same time. 

Loans against gold jewellery grows

The business of loans against gold jewellery has become a priority for many financial

institutions.

Many have chalked out mega retail spread plans, especially in Tier-III and Tier-IV cities, to

ensure more gold loans, especially to farmers. Manappuram General Leasing and Finance and

The Muthoot Group, the leading non-banking finance companies in this sector, have announced

addition of 500-600 new branches by the next year.

Private sector banks, like the country’s largest co-operative one, The Saraswat Co-operative

Bank Ltd (SCB), and HDFC Bank, have plans to intensify facilitation of loan against gold

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jewellery. SCB is currently giving such loans through 10 retail branches, which it plans to

increase to 100 by the end of 20111-12. HDFC also proposes to increase its footprint in this

segment, on a big scale.

“Retail gold loan against jewellery, a small part of our Rs 25,000-crore business, will prosper in

the coming years as we plan to lay more emphasis on this sector. In the next five years, we want

our business (both deposits and advances) to grow to Rs 50,000 crore, with proportionate

increase in the gold loan segment,” said Ekanath K Thakur, chairman of SCB, which offers a

gold loan at 13.5 per cent for a one-year period.

Traditionally, farmers mortgage gold to avail money to buy high-yielding seeds during the kharif

and rabi sowing seasons. They repay the loan during harvesting seasons by selling their output.

So, without losing any inherent asset or opportunity to produce high-agri output, they get

additional income through extra yield after borrowing funds from organised and unorganized

financiers.

Kerala-based Manappuram has grown phenomenally in the past two-three years. The loan book

position surged nearly 150 per cent to Rs 6,000 crore this year.

“There is enough scope for more and more players in this sector to create awareness about this

short-term loan, in which we offer up to 90 per cent of the value of jewellery, at up to 18 per cent

of interest. We charge no pre-payment penalty. Also, interest is charged only for the period the

loan is availed for. Hence, entry of more players will encourage customers to opt for this short-

term loan without hassles,” said V P Nandakumar, chairman of Manappuram, which has 12 per

cent of the market in the overall gold jewellery loan business.

If you consider the estimated 20,000 tonnes of gold held by individuals and 10 per cent of it is

coming for mortgage, then the total loan book position should be Rs 400,000 crore. The industry

has not penetrated even 10 per cent of that. Hence, immense of opportunity lies ahead for new

players, said George Alexander Muthoot, managing director of The Muthoot Group, the market

leader, with nearly 22 per cent share.

Public sector banks have got backing from the government-owned agricultural financing bank,

National Bank for Agriculture and Rural Development (Nabard). They offer an interest rate of

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7.5-8 per cent. But, customers’ footprints would depend upon the trust one has built over the

years, Nandakumar said.

HDFC has started gold jewellery loan offered from remote branches. According to Biju Pillai,

executive vice president, the bank considers a variety of factors like the type of ornament and

customer profile for disbursal. Having entered this segment in 2004, HDFC Bank avails a loan

with an interest rate of 10-15 per cent, depending on the loan amount and overall relationship.

Gold loan business in India With demand and price of the yellow metal rising, loan against gold

is also becoming popular. As of FY10, the organized gold loans market in India is estimated at

around Rs 35,000-40,000 crore, registering a growth of 50 % over last year. At this level, the

gold loan portfolio translates into a marginal 1.2 % of the value of total gold stock in India,

indicating that the market is significantly under-penetrated and is expected to continue growing

at the rate of 35-45 %.

According to IMACS gold loan report, as of FY10, the gold loans market is largely concentrated

between two categories of lenders — south-based NBFCs specialised in gold loans accounting

for around 32 % of total market and scheduled commercial banks holding another 58 % of the

market. The rest of the gold loans portfolio is constituted by several small co-operative banks.”

Why a gold loan

Gold loan as a concept is already popular in the South India through many organised and un-

organised lenders. South-based companies are looking to expand beyond South India with

branch expansion and heavy advertisements. “South-based gold loan companies like us are

expanding into North India as gold has now become a lifestyle product and most of the Indians

buy gold. In times of need one can get a loan against gold within minutes with minimum

formalities,” says Muthoot Pappachan Chairman & Managing Director John Muthoot.

Commodity experts feel that since gold as an asset class earns profit only when sold, it makes

sense to use the metal to take a loan in times of emergency. Gold, unlike equity, does not earn

any dividend. If you do not wish to sell it, but need money urgently, gold loan can be a good

option. One of the best features of a gold loan is that you can get the loan on the same day itself.

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Also the interest rate you pay on the loan is comparatively lower than a personal loan and

chances of getting the loan are higher.

Comparing personal loan and gold loan, Manappuram Finance Managing Director I.

Unnikrishnan says, “in times of emergency you need a loan almost immediately with minimum

documentation, and without any evaluation of your loan repaying capacity and if you have gold

it can be a better option compared to a personal loan where all these factors come into play.” A

number of public sector and private banks and non-banking finance companies (NBFCs) are

offering gold loan.

 Which lender to approach

Till now gold loans have been a bastion of small-time money lenders and NBFCs. But with

banks looking at expanding the secured loan portfolio as against the unsecured personal loan, the

options for the borrowers are aplenty. Most of the gold loan business are in the unorganized

sector and NBFCs. Experts caution borrowers to make proper inquiry about the pedigree and the

track record of the lending agency before pledging gold for a loan.

Says author of ‘Retire Rich’ PV Subramanyam, “try a public sector bank for taking gold loan as

gold loan is a secured loan. Banks are well regulated, are sound and carry lesser risk compared to

a non-banking finance company.” With high emotional value attached to the jewellery you

pledge, it’s better to opt for a lender which is stable, well diversified and is in the gold loan

business for a long period.

Interest rate & tenure

When was the last time you brought your negotiation skills into play? It’s time to use them now

if you are looking for a gold loan. There are various parameters on which the tenure, interest rate

and the level of negotiation would depend — like whether the gold is hallmarked or not, the

tenure of the loan amount and what percentage of the value of the gold you would like to borrow.

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“If you have a good quality hallmarked gold and the value of the gold you want to borrow is 60

% or less you may negotiate for lower interest rate from the lender.” Typically, the tenure on a

gold loan falls between one year to two year with some lenders even extending loan for three

years. The documents required are residential proof and a recognized photo identity for example

a PAN card, voter Identity card or driving license. The banks may take an hour to a day to extend

the gold loan. On the other hand, NBFCs like Muthoot Finance and Manappuram, going by their

advertisements, extend the loan within minutes. The average rate of interest falls between 11 %

to 14 %. However, some NBFCs are charging a much higher interest rate of 20-24 %.

 What are the inherent risks?

Even though the gold loan may seem to be an easy option to borrow money there is a word of

caution from the financial experts who advise that taking a gold loan for buying luxury items or

for consumption purposes may not be a great idea.

Experts hence advise to go for a small loan and for a small tenure. Only if you think you can

repay the loan should you go for the gold loan. Though gold loan lenders fall under the Reserve

Bank of India's supervision, there’re experts who doubt whether non-banking finance companies

lending against gold are as strictly regulated as banks. Financial experts advise to take a gold

loan in small sums and make sure that you have enough liquidity to repay the loan and get the

gold back. The gold you have pledged with the lender is usually auctioned 12 months after the

due date of repayment has lapsed.

Gold loans (or gold deposits) may be undertaken to obtain an income return on gold. The gold

that is placed on loan (or deposit) may be either a financial asset (i.e., monetary gold) or a non-

financial asset (i.e., non-monetary gold.) The gold remains on the books of the gold lender, and

the lender retains the exposure to the market risk arising from movements in the market price of

gold. Loan against Gold Ornaments is a product designed to provide liquidity against gold

ornaments without having to sell them. Gold ornaments lying idle can be put to productive use

by availing Loan against Gold Ornaments. Loan will be sanctioned on submission of all the

required documents and satisfactory assessment of gold ornaments. Loan amount is disbursed by

cash, DD or funds transfer to an account (as the case may be).

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 In the case of default in repayment, penal interest (as the case may be) will be charged around

2% per annum over and above the normal rate of interest

The product is packed with features such as:

Hassle-free quick processing of loans.

Simplified paperwork.

Easy payment options.

Attractive interest rate.

Gold loans (or deposits) are not backed by cash collateral and, in some cases, are not backed by

non-cash collateral. However, the gold may be on-sold by the borrower. With Gold Loan, you

can get an instant loan against your gold jewellery and ornaments. The procedure is simple,

documentation is minimal and approval is quick.

Features & Benefits

You can avail Loan upto Rs.20,00,000 & upto 80% of value for any purpose

Safety & Security of your Gold Jewellery

Loan processed in 30 Minutes

ATL - Anytime Liquidity

No EMI, Service only Interest and enjoy the Loan facility

Lower Interest Rates

Simple documentation and fast processing.

Overdraft limit varies depending on the market rate of gold.

What is a Loan against Gold?

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The majority of us have some gold – whether this is in the form of jewellery or pure other

ornaments of gold (including coins). You can use this gold as a security to avail a loan very

quickly, from specialist lenders and banks.

How does it Work?

You can either apply online or go to your nearest gold loans branch, and your gold items will be

valued. You will then be able to avail a loan based on the value of your gold items. The gold

jewellery or ornaments must belong to you or someone in your family.

Because you are providing security, the lender will not need a long time to consider your

application. Usually you will gain approval for the loan very quickly.

What are the Loan Tenures?

Most loans against gold are between 6 months and a year, but the tenures may vary according to

the lender or bank you use. Some gold loans are a minimum of 1 year, and up to 6 years – just

make sure you remember to check when you carry out your loan search and comparison.

Are there any Fees?

There may be fees on a gold loan, such as processing fees or administration fees. Make sure you

enquire about these in advance, so that you can plan them into your budget.

What Happens if I Cannot Repay the Loan?

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Because you are using your gold jewellery or ornaments as a security on this loan, you risk

losing them if you are unable to keep up with the loan repayments.

This could be difficult because many items of jewellery carry personal or sentimental value.

Therefore, remember to plan your loan very carefully into your everyday life and ask yourself if

you will be able to afford the EMIs over the full tenure of the loan.

Am I Eligible?

To get a gold loan, you must prove your ID, you may need to have a minimum age (though this

may vary according to the lender) and you will need to prove your address / residence.

The criteria of what kind of borrowers may apply do vary according to lender / bank, so check

this in advance as well. You may need to prove that you are salaried or professional but some

lenders can take on borrowers who are not as financially secure.

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GLOBAL SCENARIO

Loan against gold are traditionally considered taboo in households. Even when gold is pledged it

is still done as the last resort. Gold jewellery at home is considered on par with goddess lakshmi

and hence hedging gold for a loan is considered inappropriate.

Gold loan market this perception towards gold loan has gradually undergone a change and

individuals have started seeing the value of loan against gold as against availing a personal loan

the gold loan market that was highly fragmented and dominated by local jewellers, has gradually

seen the entry and growth of NBFCs and banks a clear indication of the viability of gold loans as

an important loan product.

The gold loans market has recently seen a lot of action firm both the consumers and the industry.

With gold spiralling upwards borrowers are able to get decent valuation for their gold and the

process of getting such a secured loan is also largely hassle free the southern Indian markets have

been particularly lucrative for the gold loan business -85%-90% of the gold loan market is in the

states of Andhra Pradesh, Tamil nadu and Kerala.

According to an estimation of the ICRA management consulting services (IMACS) the

organized gold loan market in India stands at $8 billion and is growing at a compound annual

growth rate (CAGER) of 40% since 2002 there is still ample potential in this segment and with

more banks /NBFCs coming into this business, there could be considerable growth in terms of

volume.

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Why NBFCs are growing

By virtue of their business model, NBFCs have grown rapidly over the last few years as

evidenced by their increase in market share. The key differentiators for the NBFCs as compared

to the banks and cooperatives are.

Quick loan approvals and disbursals, with minimal documentation

Multitude of loan options with higher LTVs.

Greater accessibility due to better penetration.

Better operating cost structure visa-a-vies banks.

Flexibility provision of very small and very large loan amounts.

Regulatory environment

While there are no means of controlling the unorganized sector the organized sector of banks and

NBFCs come under the purview of the reserve banks of India (RBI) which has norms to regulate

the gold loan market. NBFCs had been traditionally disbursing gold loans through funds received

from banks under priority lending for the agricultural sector. The loans under this category enjoy

an interest rate discount of approximately 200 bps over the normal interest rates charged by

banks. But to reduce the risk in the system the RBI ruled in February 2011 that bank credit to

NBFCs for lending against gold jewellery will not be treated as exposure to the agricultural

sector. The resulting higher interest rate for funds is expected to promote better lending practices

by NBFCs to creditworthy borrowers. With the continued rapid growth of the gold loan market

in India RBI has started examining lenders especially NBFCs for possible concentration risks

(i.e. risks due to a sharp decline in the prices of gold for a lender with a large exposure to gold

assets pledged against the loans.)

All lenders are required to adhere to the KYC norms. NBFCs allegedly have not strictly followed

this regulation and hence have been under the RBI s scanner for some time now. Currently

NBFCs gold loan are regulated by RBI. However, some state governments require compliance

39

with relevant state money lending statutes .if the state governments succeed in enforcing this

regulation the profit margin of NBFCs would be further squeezed. There have been recent

complaints regarding high interest rates and penalty rates charged by NBFCs. this has caught the

attention of regulators any regulatory move in this regard would impact the profit margin of

NBFCs.

Impact analysis: RBI’S gold loan regulation for NBFCs

In its latest move, RBI has come up with a norm for NBFCs that does not allow them to offer a

loan above 60% of the value of gold.

Why it is a setback for NBFCs?

RBI’s guideline is a setback for NBFCs because the new rules require greater capital adequacy

for the financing companies and the thresh hold for the value of loan against gold is proposed to

be at a lower value. This would mean that ornaments of the same value are expected to result in a

lesser loan amount and that to at a slightly higher cost.

Check out other aspects where NBFCs could be adversely affected. Earlier NBFCs used to

provide up to 80% loan against the gold now it would be reduced to mere 60% of the gold value.

Gold loans from banks would now become more attractive than NBFCs until they are allowed to

lend more on the value of pledged gold the cost of funding for NBFCs would go up due to the

RBIs restriction to allow the NBFCs to finance its gold loan from the banks as an exposure to

agricultural loan. NBFCs might have to reduce the interest rate to sustain hold in the gold loan

market. Hence the current profit margin would come down significantly.

What’s in favour of NBFCs?

Though this regulation would it hard on the revenue as well as bottom-line of the NBFCs there

still some positive assistive to this move:

NBFCs would continue to enjoy the nice segment advantage due to its deep presence in the gold

loan market at present; NBFCs have a 32% share of the total gold loan market. The gold loan

40

would still be cheaper than the personal loan, so the size of market is set to grow bigger in

coming days.

There are many untapped areas where NBFCs could have a better reach than the banks. The

advantage o f trouble free and quick loan processing by NBFCs would give them the edge over

the banks. NBFCs can raise funds through market borrowings, i.e. Commercial papers to lower

the cost of fund.

.

Why Gold loan is important in present scenario?

I think below chart is very helpful to understand the importance of gold loan in present

scenario.

BASIS GOLD LOAN PERSONAL LOAN

Loan

amount

No limit Rs 5000/-onward Min. Amount Rs 10000/-max up to Rs

1000000/-

Mode Cash loan By A/c payee cheque

Rate of

interest

11.40 to 26.40% based on loan

amount

Ranges between 28 to32%

Lock in

period

No lock in period Ranges between 6 to 12 month

Flexibility Totally flexible – pre- closure and

part closure

Very less EMIs fixed at the beginning of

the loan.

Documenta

tion

Address proof Photo IDPDC Driver

license

ITR form 16ID proof & residence proof

Salary slip & photograph Previous track

record.

Pre-

payment

Possible without penalty Usually not possible before 6 month after

that with penalty

Hidden

charges

No hidden charges even CWT is

borne by the company

Quite many processing fee, handling fee,

service charges , etc.

Customer Loan is provided to all customer Only to professionals or salaried class

41

profile

eligibility

people in employment with good

companies.

Service

charges

No service charges 2 to 8% loan amount payable the service

charges.

Interest on

part

payment

Interest charges only on the

outstanding amount

On the entire loan amount as fixed in the

beginning

Penalties No penalties on part and fore closure Heavy penalty on part closure.

Personalize

attention

Prompt and personalized attention is

given to the each and every

customer

DMAs and DSAs handle the customers

and not get personal attraction form the

bank.

Revolving

credit

Available as principle gets revolved

on payment of interest every 3

months

Loan has the fixed tenure and payment of

both interest and principal is to be made.

Verification No field verification Field verification is carried out.

Minimum

salary

criteria

No such criteria Monthly NET salary be 1.5 items the EMI.

Time

duration

10 – 15 days 15 minutes.

Secrecy Absolute secrecy is maintained No secrecy maintained.

42

LITERATURE REVIEW

The research project is to study “of MUTHOOT FINANCE LTD and MANAPPURAM

FINANCE LTD gold loan in Nagpur city”

kejriwalarun (2012) in his article “riches –to rags story of the gold loan industry” in

“business standard” remarked that “the reason people go to GLCS is the next -to-nil tome

they take in disbursing loans. Typically, GLCS lend up to 80% of the value of gold, making

customers a happy lot. However, last Month, the reserve bank of INDIA (RBI) reduced the

loan-to-value for GLCS to 60% of the gold content.

Bureau (2012) in his article “gold loan firms setting up SRO as RBI tightens screws” in

“economic times” concluded that “under the lens of the reserves bank , leading gold finance

companies have decided to form a self- regulatory organization (SRO) which will frame fair

business practices code for the industry

John navin (2012) in his article “and the RBI on Leander” in “business world” remarked that

,the stock market did not follow the centre banks restrictions on the lone size of gold NBFCs to

60% of the loan to value (LTV) view. The share price of Muthoot finance and Manappuram

finance, the largest and second player, fall 11.35% and 6.1% respectively, on 22 March, a day

after the RBI announcement.

Bureau (2012) in his article “RBI move on gold loan will trim companies margins” in

“economic times” remarked the gold loan financing companies on Thursday welcomes the latest

measures by the reserve bank, saying they will strengthen the industry, but analysts pointed out

that the clampdown will erode the margins of these companies and curtail growth

Jayakumar john (2011) in his article “lure of the yellow metal” in “business world” remarked

the gold loan industry has recorded growth of 35% over the past three year and explains how

various gold loan companies rises and reach the top positions”

43

Bureau (2011) in his article “should you invest in NCD of gold loan Finances Company” in

“economic times” concluded that with that we come to another important aspect of debt

investing risk. PUS bonds like those of NHAI, PFC enjoy AAA rating, while muthoot finance

enjoys a crisil AA rating. Manappuram finance has a CARE AA- rating”

Regoanil (2010) in his article “gold loan: making gold work for you” in business world

remarked that “this perception toward gold loan has gradually undergone a change and

individuals have started seeing the value of loan against gold as against availing a personal loan.

The gold loan market that was highly fragmented and dominated by local jewellers has gradually

seen the entry and growth of NBFCs and bank, a clear indication of the viability of gold loans as

an important loan product.”

“Jain T.R.” and Aggarwal, Dr S.C., statistics for M.B.A. 2nd edition, VK publication

Malhorta Naresh k and Dash satybhushan, “marketing research” (6th edition) Pearson

publication.

“Kothari C.R.,” research methodology methods & techniques 2nd edition wishwa

prakashan, daryaganj, New Delhi, chapter 4. Page 55-58. Chapter

“Method of data collocation, collection of data through questionnaire, collection secondary data”

are referred before the data collocation form from this book”

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OBJECTIVES

In this project, the primary objective is to the consumer awareness regarding gold loan

To find out the competitive positions of MUTHOOT FINANCE LTD and Manappuram

Finance Ltd gold loan in Nagpur city.

Increases the relationship between Muthoot and Manappuram & other company

consumer.

To find out the most preferred channel.

To find out what should do to boost Muthoot and Manappuram finance limited.

45

SCOPE

For borrowers, gold loans have emerged as one of the best means of raising quick, short-term

capital. For lenders, gold loans are more advantageous compared with home and car loans

because of the shorter tenures, lower processing time and cost, and greater returns due to higher

interest rates. These factors, along with appreciation in value of gold, have led to an explosion in

the gold loan market. With everyone wanting a piece of this action, the organized sector is

challenging the large unorganized gold loan market dominated by pawnbrokers and

moneylenders, with NBFCs leading the pack due to simpler approval and disbursal processes,

flexible products and better accessibility.

An examination of these trends makes clear that banks/NBFCs that aren’t yet into the gold loan

market might find it attractive. This is due to the following factors:

Better ROI due to lower cost, higher interest rates and strong collateral.

Ability to compensate for lower off-take of car/ home loans.

Scope for cross-sell opportunities in future including other gold-based products.

Opportunity to capture the growing under-served and under-penetrated market.

With approximately 65% of the market in rural areas, firms need to develop strategies to target

this segment effectively and provide better accessibility to borrowers. When expanding, firms

need to ensure consonance of services and operations throughout the network.

Firms need to manage risks related to possible sharp fall in gold prices and non-adherence of

regulatory norms and also need to ensure that physical assets are properly valued, stored and

documented. Firms need to invest in technology to better manage the increasing volumes and to

reduce risks.

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HYPOTHESIS

The following hypothesis is formulated to achieve the objective of the present study:

Muthoot Group and Manappuram Finance Ltd is a leading bank in Indian banking

industry.

Customers are satisfied with the services provided by the bank.

There are minimum formalities for the loan application.

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RESEARCH METHOEOLOGY

Research methodology is a way to systematically solve the problem. It may be understood has a

science of studying how research is done scientifically.

This of research methodology is that it helps in identifying the problem, collecting, analyzing the

required information data and providing an alternative solution to the problem .It also helps in

collecting the vital information that is required by the top management to assist them for the

better decision making both day to day decision and critical ones. Report is based on primary as

well secondary data, however primary data collection was given more importance since it is

overhearing

Meaning of research

Research is defined as “a scientific & systematic search for pertinent information on a specific

topic” research is an art of scientific investigation. Research is a systemized effort to gain new

knowledge. It is a careful inquiry especially through search for new facts in any branch of

knowledge. The research for knowledge through objective and systematic method of solution to

a problem is a research

Research design

Research design is the conceptual structure within. Which research is conducted; it constitutes

the blueprint for the collection, measurement and analysis of data.

As search the design includes an outline of what the researcher will do from writing hypothesis

and its operational implication to the final analysis of data

Research design can be three types

Exploratory research design

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Descriptive research design

Experimental research design

The present study is descriptive in nature, as it seeks to discover ideas and insight to bring out

new relationship. For fulfilling the predefined objectives the descriptive research was conducted.

An Exhaustive market survey of various costumers enough to provide opportunity for

considering different aspects of problem under study

The research objectives, questionnaire was designed.

Data collocation

Two type of data collection primary and secondary

Primary data

Primary data refer to the first hand fresh data collected from the field it was collected through the

questionnaire method. Questionnaire will includes MCQ, ranking, checklist, and rating type of

equation

Secondary data

Secondary data refer to the already published information. Secondary data was collected from

various sources magazines, journals, newspaper, internet, government, and industry

Research is based on primary Secondary data. Research has been done by primary data

collection, and primary data has been collected by interacting with various people in Nagpur city.

The secondary data has been collected through various journals and websites.

Out of total 150 questionnaires distributed only 100 questionnaires were received back. The

questionnaires focused on the gold loan, how you know about the gold loan, benefit of gold loan,

why to deal gold loan and the level of satisfaction of the customer.

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Data sampling

The target audient for this research includes Nagpur city people. It was also collected through

personal visits to persons, by formal and informal talks and through filling up the questionnaire

prepared. The data has been analyzed by using mathematical/Statistical tool.

Sampling unit:-a decision has to take concerning sampling unit before selecting sample. Here

I have my sample unit includes the people of Nagpur gill road market.

Sample size:- The sample size of my project is limited to 100 people only. Out of which only

86% people had know about the gold loan. Other 14% people did not have known about the gold

loan.

Sampling technique:-the selection of respondents was done on the basis of convenience

sampling. In convincing sampling the samples are being selected on the basis of ease or

convenience. The respondents who are easily approachable will be selected in this project.

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DATA INTERPRETATION AND ANALYSIS

1 Are you aware about gold loan?

Option Yes No

Response 86 14

% 86% 14%

86%

14%

Awereness Response

Yes

No

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Analysis: - from the above graph it is clear that 86% of the population are aware about the gold

loan and 14% of the population are not

Interpretation: - from the above graph we can see that majority are aware about the gold loan

and few are not aware about the gold loan.

2 How do you come to know about gold loan?

Option TV

Advertisement

Wall

paintings

Direct

marketing

Newspape

r

banner

s

Friends &

relative

Respons

e

48 13 22 5 4 8

% 48% 13% 22% 5% 4% 8%

48%

13%

22%

5%

4%8%

Reasons of Awereness

TV AdvertisementWall paintingsDirect marketingNewspaperbannersFriends & relative

52

Analysis:-it is clear from the table that 48% of the aware only because of tv advertisement, 13%

are because of hoardings, 22% are due to direct marketing, 5% are newspaper, 4% are banners

and 8% are due to friends and family.

Interpretation:-from the above graph it is clear that majority of the population are aware only

because of TV advertisement, some are because of direct marketing and very few are because of

banners and newspapers.

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3 Have you ever deal in gold loan?

Option Yes No

Response 60 40

% 60% 40%

60%

40%

Gold Loan Deal

Yes

No

Analysis: - from the above graph we can see that 60% of the population have deal and 40%have

not deal in gold.

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Interpretation: - from the above graph we can see that most of the people are dealing in gold

loan and very few are not dealing with gold loan.

4 Do you want to deal in gold loan in future?

Option Yes No

Response 73 27

% 73% 27%

73%

27%

Future Dealing

Yes

No

Analysis: - from the above graph it is clear that 73% of people are in a favour of dealing with a

gold loan in future and 27% are not in a favour.

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Interpretation: - from the above graph it is clear that most of the population are in favour of

future dealing with MUTHOOT AND MANAPPURAM .And very small are not in favour.

5 With which company you deal or you wish to deal?

OptionMuthoot finance

Muthoot fincrop

Mannapuram

Karvy finance

Future group IIFL Other

Response 29 11 26 8 9 12 5

% 29% 11% 26% 8% 9% 12% 5%

29%

11%

26%

8%

9%

12% 5%

Market Percentage

Muthoot finance

Muthoot fincrop

Mannapuram

Karvy finance

Future group

IIFL

Other

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Analysis:- from the above graph it is clear that 29%of the population dealing with muthoot

finance, 26%are dealing with Mannapuram or wishing to deal with Mannapuram and few are

dealing with karvy, muthoot fincorp, future group

Interpretation:- from the above graph it is clear that most of the customer are dealing with

muthoot finance and Mannapuram. And very small are dealing with MUTHOOT AND

MANAPPURAM , Muthoot fincorp, and very few are dealing with future group, karvy.

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6 Which of the following is the most preferable thing at the time of availing gold loan?

Optionrate of interest

Maximum per gram rate Flexibility

customer dealing

Any other

Response 70 66 40 69 2

% 28.3% 26.7% 16.2% 27.9% 0.8%

28.3%

26.7%16.2%

27.9%0.8%

Preferances

rate of interestMaximum per gram rateFlexibilitycustomer dealingAny other

Analysis:-from the above graph it is clear that 28.3%of the population are preferring only

because of rate of interest ,26.7%are because of max per gram rate,27.9%are because of good

customer dealing because few are flexibility16.2%and vary few are other

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Interpretation:- from the above graph it is clear that most of the population are preferring

company only because of rate of interest, some are preferring because of max per gram rate and

good customer dealing, and vary few are flexibility and other

7 Are you satisfied with the current deal?

Option Yes No

Response 39 61

% 39% 61%

61%

39%

Current Deal

Yes

No

Analysis: - from the above graph it is clear that 39% of the population are not satisfied with their

current deal and 61% of the population are satisfied

59

Interpretation: - from the above graph it is clear that most of the population are not satisfied

with their current deal they want to change their current deal and some are satisfied with their

current deal.

8 Which of the following are Main reasons of satisfaction?

Optionrate of interest Maximum rate Flexibility customer dealing

Response 48 37 9 6

% 48% 37% 9% 6%

48%

37%

9%6%

Satisfaction Factor

rate of interest

Maximum rate

Flexibility

customer dealing

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Analysis:-from the above graph it is clear that 48%f the population are satisfied only because of

rate of interest 37%are because of max per gram rate6% are because of good customer dealing

9%because few are flexibility and vary few are other

Interpretation: - from the above graph it is clear that most of the person are satisfied with rate

of interest and max per gram rate. Some are due to good customer dealing, and flexibility, and

very few are with others.

9 Do you want to change your loan by any other company?

Option Yes No

Response 75 25

% 75% 25%

75%

25%

Company Change

YesNo

Analysis: - from the above graph it is clear that 75% of the population want to change their

company and 25%of the population do not want to change.

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Interpretation: - from the above graph it is clear that most of the population want to change

their company and very few want to remain with the same company.

10 Are you aware about Muthoot and Manappuram ?

Option Yes No

Response 56 44

% 56% 44%

56%

44%

Muthoot and Manappuram Awareness

Yes

No

Analysis: - from the above graph it is clear that 56% of the population are aware about the

Mutthot & Manappuram and 44%of the population are not aware about the Mutthot &

Manappuram.

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Interpretation: - from the above graph we can see most of the population are aware about the

Mutthot & Manappuram but still the rates of those people are also high who are not aware about

the Mutthot & Manappuram.

11 Have you ever visit in any branch of Mutthot & Manappuram?

Option Yes No

Response 40 60

% 40% 60%

40%

60%

Branch Visit

YesNo

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Analysis: - from the above graph it is clear that60% of the population have not visited any

branch of Mutthot & Manappuram gold loan company and 40% have visited.

Interpretation: - from the above graph we can see that majority of the population have not

visited any branch of Mutthot & Manappuram gold Loan Company and few have visited.

12 Do you wish to deal with Mutthot & Manappuram?

Option Yes No

Response 77 23

% 77% 23%

77%

23%

Mutthot & Manappuram dealing

Yes

No

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Analysis: - from the above graph it is clear that people want to go the Mutthot & Manappuram

because 77% of the population said yes for dealing and very few said no.

Interpretation: - from the above graph it is clear that most of the population want to deal with

Mutthot & Manappuram for the purpose of gold loan and very few are not interested.

FINDINGS

It is also clear most of people prefer Mutthot & Manappuram to take the gold loan as

compare to other companies.

Mutthot & Manappuram gold both are providing special schemes which are helpful to

attract customer.

Most of the customers prefer Mutthot gold loan because of good per gram rates.

There are no charges for entry and exit loans.

India info line finances ltd understand the dreams, needs, aspirations, concerns and

resources are unique and this is reflected in every move they do for the sake of individual

customer.

They are treating the customer as their family member and guiding them properly.

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It is clear from analysis that most of population are aware about Mutthot as well

Manappuram in term of gold loan.

In Occupation group most of the Investors were Private employees, the second most

Investors were Govt. employees and the least were associated with Agriculture.

SUGGESTION

The company has provided proper training to new employees so that they can attract

customers easily.

The company can conduct seminars and workshops so that they can provide information

to the people and give answers to queries.

The company should increases the advertisement regarding the gold loan in national TV.

The company should adopt some strategies to increase the business through existing

customers.

The company should create the awareness about the gold loan among the general public.

They should visit the jewellers. Businessman and other work places so that they can

guide them.

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Mutthot should use traditional ways of promotion in rural location. Latest communication

are lacking in Nagpur city

CONCLUSION

Most of the companies which are offering gold loan in India are still at growth stage and hence

there are ample of opportunities for all the companies which are offering gold loan to tap

customer. The perception of customer is yet to be changed because still they don’t feel

comfortable in taking gold loan because of traditional approach hence there is a lot of education

has to be provided to make people aware of gold loan. To achieve sustainable growth in this

sector Muthoot as well as Manapurram needs to endeavour with maximum efforts the company

can achieve several milestones in future while maintaining the existing customer relationship.

As per the mentioned hypothesis Muthoot and Manappuram both are the non banking financial

corporations. Customers are very much satisfied with the services. You get the gold loan within

few minutes and it required few documents.

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LIMITATION OF THE STUDY

Time limit is the major constraint

As the manager are busy in their duty schedule it is not possible for us to spend more

time in interaction and discussion with them

Some difficulty getting the people answer the survey questions because of their workload

and the responsibility they have busy his work

As per company rules many information was not disclosed

Finding &conclusions are based on superficial knowledge

The response given by the respondents may not be 100% accurate and may be biased

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BIBLIOGRAPHY

Books

Kothari C.R, Research methodology methods and techniques 2004, new age international pvt.

Ltd, New Delhi edition 2nd pg 56-57

Malhotra Naresh and dash Satyabhushan marketing research, 2010 Pearson publication edition

2nd pg 40-48

Luck davidet al marketing research, 2004 prentice hall India, edition 7th pg 53-59

Kejriwalarun (2012): article “riches to rags story of the gold loan industry in “business standard”

Bureau (2012): article “gold loan firms setting up SRO as RBI tighten screws” in “economic

time”

johnnevin (2012): article “and the RBI on lenders” in “business world”

Jaykumar, jhon (2011): in this article “lure of the yellow metal” in in “business world”

69

Bureau (2012): article “should you invest in NCDS of the gold loan finance company” in

“economic time”

Ragoanil (2012) in his article “gold loan: making gold work for you” in “business world”

Websites

Websites

www.muthootfinance.com

www.mannapuramgold.com

www.5paisa.com

http://www.business-standard.com/india/news/riches-to-rags-storythe-gold-loanindustary/473351

http://www.crindia.com/commodity/gold.html

http://www.moneycontrol.com/master/yourmoney

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QUESTIONNAIRE

General Information

NAME..............

ADDRESS....................

AGE...........

OCCUPTION.......................................

CONTACT NO....................

EMAIL...............................................

Q.1 Are you aware about gold loan?

71

A yes B No

Q.2 How do you come to know about gold loan?

A. TV Advertisement B. Wall paintings/hoardings C. Direct marketing

D. Newspaper E. banners F. Friends & relatives

Q.3 Have you ever deal in gold loan?

A. yes B. No

Q.4 Do you want to deal in gold loan in future? (If yes which company)

A. yes B. No

Q.5 with which company you deal or you wish to deal?

A. Muthoot finance B. Muthoot fincrop C. Mannapuram

D. Karvy finance E. Future group F. IIFL

G. other (specify)

Q.6 which of the following is the most preferable thing at the time of availing gold loan?

A. rate of interest B. Maximum per gram rate C. Flexibility

D. customer dealing E. Any other (specify)

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Q.7 Are you satisfied with the current deal?

A. yes B. No

Q.8 which of the following are main reason of satisfaction

A. rate of interest B. Maximum rate C. Flexibility

D. customer dealing E. Any other (specify)

Q.9 do you want to change your loan by any other company?

A. yes B. No

Q.10 Are you aware about Muthoot and Manappuram?

A. yes B. No

Q.11 Have you ever visit in any branch of Mutthot & Manappuram?

A. yes B. No

Q.12 Do you wish to deal with Mutthot & Manappuram?

A. yes B. No

(Thanks for your kind cooperation)

Signature.............................

Date................................