George Alexander Muthoot sees no demand slowdown, expects strong gold loan momentum to continue

Gold loan growth at Muthoot Finance continues to remain strong at around 50% year-on-year, but underlying trends show a decline in gold tonnage and a sequential fall in active loan accounts for the second consecutive quarter. According to management, the growth is increasingly being driven by higher gold prices rather than expansion in the customer base or physical gold pledged.

Explaining the trend in tonnage, George Alexander Muthoot, MD, Muthoot Finance said that the movement is largely structural due to the short tenure of gold loans and frequent portfolio churn. He said, “Gold tonnage depends on price and churn. Loans are very short term.” He further added that with rising gold prices, the amount of gold required for the same loan value has reduced significantly, stating, “A Rs 1 lakh loan earlier needed 10 grams; now it needs only 6 grams due to price movement.”

On customer trends, he acknowledged a decline in smaller ticket-size loans, while larger ticket loans have seen growth. He noted, “Small-ticket loans are declining, bigger-ticket loans are increasing.” He added that such shifts are typical for large legacy institutions, saying, “This happens in older companies like ours.”

Despite strong growth momentum, the company has maintained its guidance of around 15% growth for FY27. Muthoot clarified that this should not be interpreted as demand normalisation or caution, but rather a continuation of its long-standing guidance approach. On demand conditions, he said, “We continue to see strong demand for gold loans,” adding that tighter conditions in unsecured lending are pushing more borrowers towards gold loans.

On competition and pricing, the company acknowledged increasing participation from banks and NBFCs but maintained that the overall market is expanding rather than becoming saturated. “There is space for everyone in the market,” he said, highlighting that gold loan portfolios across banks and NBFCs have grown significantly in recent years. He also pointed to its strong distribution network, noting, “We operate with 5,000+ branches and continue growing.”

On yields, which have risen to nearly 21% following recent rate hikes, Muthoot indicated that current levels may not sustain. He said, “Yields are currently elevated due to past rate hikes,” and added that a more normalised range going forward would be around 19–20%.

On rising gold prices and the impact of higher customs duty, the company said the immediate effect has been an increase in collateral value rather than any demand disruption. “Higher gold prices increase collateral value,” he said. He also highlighted the large stock of idle gold in India, stating that most of it remains outside the organised financial system and can still be monetised over time.Overall, the outlook remains positive, with the company expecting sustained demand supported by tight liquidity in unsecured lending markets and continued reliance on gold as a trusted collateral. “Gold loan demand remains strong,” he said, adding that MSMEs and small businesses continue to rely on gold-backed credit, reinforcing long-term growth visibility for the sector.