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2013-12-27

Manappuram Finance to diversify into small business, housing finance

Following the Reserve Bank\\\'s concern over \\\'concentration risk\\\', gold loan major Manappuram Finance has said it will be diversifying into lending for small businesses and housing finance.

Following the Reserve Bank's concern over 'concentration risk', gold loan major Manappuram Finance has said it will be diversifying into lending for small businesses and housing finance.
 

Talking to media persons in Mumbai, V P Nandakumar, MD and Chief Executive said, “The regulator wants us to diversify and there are synergies which we can tap.”
 

He said lending to small businesses will start in the next three months, but refused to give a timeline for the housing business, saying that the company has for now decided only to enter the highly competitive fray.

 

Loans to the small businesses will be done in a secured way, against some underlying asset, he said, adding that the company will have a separate subsidiary for the housing finance business to take advantage of provisions like availing refinance from the National Housing Bank.
 

The company's deputy chief executive and executive director I Unnikrishnan said 80 per cent of its borrowers own small businesses and hence getting into the fray for lending to small businesses makes a good business case.
 

Notably, sector regulator Reserve Bank of India had shown concerns about the 'concentration risk' for companies like Mannapuram who finance against gold following the volatility in the gold prices.
 

Steps taken by the RBI include a reduction in the loan to value (LTV) ratio, or the maximum permissible limit of lending up to 60 per cent, which resulted in massive reductions in asset growth for such companies.

 

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