- Morgan Stanley turns positive on gold loan NBFCs after RBI's branch approval proposal
- RBI proposes removing prior approval for gold loan NBFCs to open over 1,000 branches
- Current approval rules create bottlenecks for large gold loan lenders like Muthoot and Manappuram
Moragn Stanley has turned positive on gold loan-focused non-banking finance companies (NBFCs) after the Reserve Bank of India proposed removing the requirement for prior regulatory approval to open more than 1,000 branches. The proposal was outlined in RBI's monetary policy, and is expected to significantly ease operational constraints for gold loan lenders and accelerate their expansion plans.
According to Morgan Stanley, the proposed change eliminates a key regulatory disadvantage faced by gold loan NBFCs compared to diversified NBFC peers, without offering any offsetting benefits for their specialised business model. The brokerage described the development as a clear positive for the sector.
Operational Bottleneck Set To Ease
Under the current framework, gold loan NBFCs require explicit RBI approval to expand beyond 1,000 branches, often leading to delays and additional compliance requirements. Morgan Stanley noted that this approval process has historically acted as a bottleneck, particularly for large players with aggressive branch rollout strategies.
In contrast, diversified NBFCs are not subject to similar restrictions, creating an uneven playing field. The proposed removal of the approval requirement is expected to align regulatory treatment across the sector and improve scalability for gold loan-focused lenders.
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Key Beneficiaries
Brokerages see Muthoot Finance and Manappuram Finance as the primary beneficiaries of the policy shift. Muthoot currently operates 4,967 gold loan branches, while Manappuram runs 4,044 branches, placing both well above the 1,000-branch threshold that previously triggered regulatory scrutiny.
Morgan Stanley pointed out that Manappuram has, at times, had to meet additional conditions or face delays in securing permissions for new branches. Even Muthoot, despite its scale and track record, has encountered procedural delays. The proposed rule change provides both lenders with the optionality to accelerate branch expansion if demand conditions remain supportive.
Analysts also note that the proposal does not compel lenders to expand aggressively but removes a regulatory overhang that constrained strategic flexibility. With gold loan demand remaining resilient and branch-led sourcing still critical for customer acquisition, the easing of approval norms is expected to improve long-term growth visibility.
The Reserve Bank of India's Monetary Policy Committee (MPC) has decided to keep the policy repo rate unchanged at 5.25%, in line with the expectations of the vast majority of market observers. By opting for a pause, the central bank signalled a period of consolidation following a cumulative 125-basis-point reduction since last February.
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