Muthoot Finance and Manappuram Finance shares tank up to 9% after RBI advisory

RBI had reportedly asked to strictly adhere to the provision on cash disbursement of loans wherein no NBFC should disburse loan amount in excess of Rs 20,000 in cash.

“Please refer to provisions of Section 269SS of Income Tax Act, 1961, which stipulates that no individual can receive more than 20,000 rupees as loan amount in cash,” the letter from the Central Bank stated.

"Consequently, no NBFC should disburse loan amounts in excess of 20,000 rupees in cash."

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Earlier in March, the central bank had also prohibited from disbursing , for the violation of cash disbursal norms, among other issues.

George Alexander of stated that the bank does not see the advisory as a challenge as they do not foresee any customer denying directly into their bank accounts.

There will be no loss in the number of customers as the management is 100% confident that the central bank’s new norms will not impact Muthoot volumes, Alexander further stated.

Recently, Muthoot Finance's microfinance arm, Belstar Microfinance, filed preliminary papers with capital markets regulator SEBI to raise Rs 1,300 crore through an initial public offering (IPO), while Manappuram’s subsidiary Asirvad Micro Finance also got a nod from SEBI to raise funds through an IPO in the last month.

The shares of Manappuram have gained 45.5% in the last one year while Muthoot has increased by 48% in the same period.

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