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A PROJECT ON
Study on Gold loan in India
A comparative study between Muthoot finance and
Mannappuram finance
Submitted By
Jigar Hanat
T.Y. BBI Sem-V
(2015-2016)
Project Guide
Prof. Meghna Vyas
Affiliated to University of Mumbai
S.K.SOMAIYA COLLEGE OF ARTS, SCIENCE
AND COMMERCE
AUROBINDO, VIDYANAGAR
VIDYAVIHAR [EAST]. MUMBAI-400077
ACKNOWLEDGEMENT
I, Jigar Hanat, would take this opportunity to thank the University of Mumbai
for providing me an opportunity to study on a project on Comparative study
On gold loan. This has been a huge learning experience for me.
With great pleasure I take this opportunity to acknowledge people who have
made this project work possible.
First of all I would sincerely like to express my gratitude towards my Project
Guide Prof. Meghna Vyas for having shown so much flexibility, guidance as
Well as supporting me in all possible ways whenever I needed help. I am
thankful for the motivation provided by my Project Guide throughout and
helped me to understand the topic in a very effective and easy manner.
I would also like to thank the Principal Dr. Sangeeta Kohli and other teaching
faculties of the college, my colleagues, Library staff and other people for
providing their help as and when required to complete this project.
I acknowledge my indebtedness and express my great appreciation to all people
behind this work.
DECLARATION
Date:
INDEX
Chptr
No.
Page
Chapter name
No.
Executive summary
2-5
Section I
Introduction to gold loan and market
1
Fundamentals of banking
17
24
Organisational profile
32
Section II
Research study and data analysis
5
42
54
67
71
Annexure
72
LIST OF TABLES
Sr
no.
Particulars
Page
no.
14-15
18
27
29
Schemes-Muthoot finance
Schemes-Mannappuram finance
Documents required
Rate of interest
46
Postage charges
47
43-44
45
LIST OF FIGURES
Sr no.
Particulars
Page
no.
26
26
26
38
41
48
54
56
57
10
58
11
59
12
Current deal
60
13
Reasons of satisfaction
61
14
62
15
63
16
64
17
65
18
66
EXECUTIVE SUMMARY
Comparative study of gold loan is a very vast topic hence covering each and every concept
isnt possible. The emphasis of this research is on the theory and practice of gold loan offered
by Muthoot finance and mannappuram finance, because of its critical importance in the
modern banking framework.Gold loan is not a new phenomenon; loan against gold activity is
going from many previous years. In this topic we understand the comparison of gold loan
schemes offered by Muthoot finance and mannappuram finance. This project includes the
overall profile of mannappuram finance and Muthoot finance limited, their schemes, and
rates of interest and also the information of Indian gold market and background of society.
The project includes the history of gold loan of both the banks.it consists of all the datas in
part of gold loan offered by both banks. Project also covers the gold loan market of past few
years .The project consists various objectives, limitations and research methodologies
The book is divided into two major sections. Section I of the study - introduction on gold loan
and gold loan market consists of the theoretical research from various articles and websites as
secondary sources. Section II comprises of the actual research study of gold loan with
reference to Muthoot finance and mannappuram finance limited. Research methodologies
were applied for seeking the data related to project viz primary data arrived by forming
questionares,as well as secondary data with help of websites ,books ,document, newspapers
etc.
Secondary objective
To suggest various factors to improve customer preference, thus increasing the
schemes and lowing the e interest rate of one of the companies.
To find the futuristic scope of gold loan market
To find out the preference of people for Gold banks or jewelers
To find out the perception of the people regarding loan against gold.
2
RESEARCH METHODOLOGY
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
EXPLORATORY STUDY
To analysis and interpret the data collected using figures and tables
The last phase of this project is to give suggestion to both Muthoot finance and
manappuram finance and leasing limited.
COLLECTION OF DATA
The success of this study is largely based on the proper collection of the data. The data
collected for this project is by two ways:
PRIMARY DATA:
Data collected directly by the investigator is called primary data. This information is
original and firsthand information. Primary data is collected by various method they are:
Questionare
The primary data was collected mainly by using a Questionare. In study, structured
Questionare consisting of list of questions pertaining to the dichotomous questions to normal
people and to manager.
Survey method
Survey method was used to know the customer preference towards gold loan. Questionare
was circulated to the people for knowing the gold loan awareness.
SECONDARY DATA
The collected by the investor from the data already collected from others for some other
purpose are called secondary data. Thus the secondary data is the refined data of secondary
data.it is also called as second hand data because the data is collected by the previous reports
and previous data
In this project the secondary data is collected from various websites, annual reports,
newspaper, articles, journals etc
STATISTICAL TOOLS:
Diagrammatic representation
Diagrams are used to represent the tabulated data diagrammatically as they will give a vivid
picture about the information collected
Simple bar diagram
Multiple bar diagram
Pie diagram
In this particular study the attitudes of a selected sample have been analyzed. There is
a note of relevance to primary data. Since the research objectives can only be
achieved through collecting primary data
INTRODUCTION
The term banking is derived from the word banco means a bench. The term banking has
undergone tremendous change over the years. The traditional and commercial banking
activities of accepting deposits and lending has been replaced by the concept of universal
bankig and now international banking. International banking is not a new phenomenon;
international bank activity can be traced back to as early as the 13th century. In this topic we
understand the difference between Indian banking and international. International banking
helps us to know how important international banking for the progress of India and also for
the counter. It i-s one of the most important factors responsible for economic growth of the
nation
DEFINITION:
Banking business: As per Section 5(b) of the Banking Regulation Act, 1949, "banking"
means the accepting, for the purpose of lending or investment, of deposits of money from the
public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or
otherwise.
Banking Company: As per Section 5(c) of the Banking Regulation Act, 1949, any company,
which transacts the Banking business in India, is termed as banking company
MEANING:
Banks are intermediaries which accept deposits and lend money to the industrial and
personal borrower. Bank earns spread which is the difference between deposit interest rate
and lending rates. Spread is the recovery of cost and profit. International banking includes all
activities and services that facilitate the movement of goods and services and fund from one
country to another
Accepting Deposits: Commercial bank accepts various types of deposits from public
especially from its clients. It includes saving account deposits, recurring account deposits,
fixed deposits, etc. These deposits are payable after a certain time period.
Making Advances: The commercial banks provide loans and advances of various forms. It
includes an overdraft facility, cash credit, bill discounting, etc. They also give demand and
demand and term loans to all types of clients against proper security.
Credit creation: It is most significant function of the commercial banks. While sanctioning a
loan to a customer, a bank does not provide cash to the borrower Instead it opens a deposit
account from where the borrower can withdraw. In other words while sanctioning a loan a
bank automatically creates deposits. This is known as a credit creation from commercial
bank.
B. General Utility Functions : The general utility functions of the commercial banks
include:
o
To act as referees.
To accept various bills for payment e.g. phone bills, gas bills, water bills, etc.
To provide various cards such as credit cards, debit cards, Smart cards, etc.
FUNDAMENTALS OF LOANS
In finance, a loan is a debt provided by one entity (organization or individual) to another
entity at an interest rate, and evidenced by a note which specifies, among other things, the
principal amount, interest rate, and date of repayment. A loan entails the reallocation of the
subject asset(s) for a period of time, between the lender and the borrower.
Home loans
Home Loans are taken by people for a variety of home-related purposes such as construction
of home, home renovation, home extension, buying of property or land, or payment of stamp
duties. Home loans comprise an adjustable or fixed interest rate and payment terms. Some
types of home loans are mentioned below Home purchase loan
Land purchase loan
Home construction loan
Home extension loan
Home renovation loan
Stamp duty loan
NRI home loan
Loan against property
Personal loans
This type of loan is given to individuals after accessing their credentials based on their
profession or business, or any other sources of income. The loan can be utilised for any
purpose, for example, paying debt, marriage expenses or vacation expenditure. No collateral
security is required for this type of loan. The span of personal loan repayment varies from 12
months to 60 months depending upon the principal amount and the EMIs. The interest rate
ranges from 15
9
Business loan
This type of loan is provided to either existing businesses or those venturing into new
business. As banks provide loans on the basis of individual's credentials, it is bit difficult to
get a loan for starting a business. It is very important for individ-uals (starting a business) to
have a clear cut business plan as it is the most important requirement to convince the banks
that your business has the capability of repayment. Banks then rely on individual's
background, assets/property, previous loan history and dedication towards work. Banks also
prefer those individuals who have already insured the property for their business.
For
existing
businesses,
loan
is
provided
in
the
following
ways:
Term loans Amount provided for a fixed tenure at the applicable interest rate: three years
for short term loan and 10-15 years for long term loans.
Bank overdraft limits Ability to withdraw more money than what is deposited.
Bill Discounting Short-term borrowing used to improve a company's working capital and
cash flow position.
Education loan
Required by and provided to students who want to pursue higher education in resident
country or abroad. Students should have an admission offer from an institution before they
apply for an education loan. The loan takes care of the fees of the institution including
examination and library fees; travel expenses for abroad; cost of books and equipment
required; any insurance for the student, if applicable; and any additional expenses such as
tours, thesis, project work, etc. The terms of education loans vary from bank to bank. The
RBI has fixed certain norms on the total amount of loan that can be disbursed; however,
10
Vehicle loan
Compared to other loans, it is easier and simpler to take vehicle loans. Vehicle loans involve
less paperwork and around three to six working days are required to get the clearance. The
interest rates vary from bank to bank based on their base rate. The repayment process
involves Monthly EMIs and early repayment options
Loan against Insurance Policy
Any individual having an insurance policy can take loan against it from the insurance
company. The amount of loan depends upon the type and period of the policy. It is generally
up to 80 percent of the surrender value of the policy. The rate of interest on loan against
insurance is very less and varies with the companies. The tenure (during the policy term) and
repayment options are decided by the insurer company as per their policies. The unpaid loan
amount/ interest amount is adjusted to the policy amount before any payment against the
policy is made.
Loan against PPF
Loan against PPF is one of the easiest and most beneficial loan options in India. The loan is
disbursed easily. The loan against PPF is usually of a small amount depending upon the
money in the PPF account. The rate of interest is 2 percent more than the rate of interest
given for the PPF at the time when loan is taken. The loan is available from the second year
of account opening, i.e., after completion of one year of account opening. The loan can be
availed within five years of account opening. If five financial years have passed since the
account opening, the account holder cannot apply for the loan. The repayment of the loan
should be made in next 36 months, i.e., three years from the date of loan.
11
Gold loan
Gold loan is imparted only on providing gold as security to a bank or any other lending
institution. It is considered as one of the safest methods as the loan amount is provided on the
basis of the security submitted. Amount ranging from Rs. 5k to 25 lakh can be taken as loan
against gold. Amount equivalent to 80 percent to 90 percent (varying from bank to bank) of
the total value of the gold is given as loan to the borrower. Depending upon the bank, the
tenure of gold loan varies from one day to two years. The extension of tenure is also allowed
by few banks. T-he rate of interest usually ranges from 14 percent to 24 percent, depending
upon the financial institution. The banks charge processing fees of up to 1.5 percent. There is
no prepayment fee. You can repay the gold loan any time during the tenure. EMI policy also
varies from bank to bank; few banks prefer EMIs where interest and principal are charged
monthly, whereas few only charge the interest on a monthly basis and offer flexibility for the
payment of the interest amount.
A gold loan is a loan which is taken against gold as a security. In India, gold loan has become
popular these days. Many private banks, nationalized banks and finance companies are
12
13
Secured
The loan can be used for purpose, as long as it is not for any illegal
Multi-purpose
14
High loan-to-value
(LTV)ratios
While banks would typically not give more than 75% of the gold
value as loan,NBFCs lending could go as high an 95% in case of
high purity gold
There is no minimum for the loan and, if needed be one can return the
Shorter loans
tenure
Loan amount the very next day. The average tenure of the gold loan is
about90 days to 100 days
The interest rates depends on the tenure and the amount of loan.it
varies from 12% to 18% in the case of banks, while NBFCS,it can
Varied interest
rates
15
Gold loan doesnt demand any certificate to show your salary or income and even no
credit card history is required. Thus even unemployed and non-working people can
go for gold loan.
Unlike any other unsecured loan, gold loan doesnt require many papers, only few
documents such as ID proof and address proof is enough to avail for such loan.
One of the main advantages of gold loan is its low interest rates. Usually loan over gold is
provided at the interest of 12-16% per annum and this is quite low compared to personal
loans available at interest rates of 15-26% per annum.
In rural areas Agricultural loan against gold is also available for agriculturist at very
to do is pledge your gold with a bank or finance company and get Upto 80% of the
market value of the gold as a loan.
Borrower will be given an option to pay only interest during the entire term and at
the end of the tenure you can pay complete borrowed amount in single shot.
In case of gold loan processing time is very less. Usually banks take just few hours
16
17
Gold has always fascinated us Indians but do you know how prices of gold have varied in
India. I happen to visit RBI website which publishes lots of reports including weekly gold
prices
So here it is 40 years price history of gold
18
1.
2.
2004 Obtained highest rating of F1 from Fitch Ratings for short term debt of
2005 Retail loan and debenture portfolio of the Company exceeds Rs. 500
Million.
4.
5.
2006 F1 rating obtained from Fitch Ratings affirmed with an enhanced short
7.
8.
9.
20.
2010 Retail loan and debenture portfolio crosses Rs. 50 billion and Rs. 20
Billion respectively.
21.
22.
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.
26.
Limited. 27.
Matrix Partners India Investments, LLC and Baring India Private Equity Fund III
Limited
20
21
Valspar, a coastal village 25 kilometres away from Trissur town. The main activity of the
firm is money lending and gold loans. Over the years, the business flourishes and it
acquires a reputation as a safe-haven for the savings of the local people, offering good
returns and total safety.
2)
MFL becomes first NBFC from Kerala to go for a credit rating exercise. ICRA assigns
rating of MA to its fixed deposit programmer. MFL approaches the capital market with its
first Public Issue of shares. As the first Kerala based NBFC to go for a public issue, the
shares are listed on the Bombay, Madras and Cochin stock exchanges.
3) MFL becomes first NBFC in Kerala permitted by RBI to accept deposits from the public
without restrictions on the limit. The company is also permitted to set its own interest rate
4) Becomes the first NBFC in Kerala to be given a Certificate of Registration by the RBI.
A major policy change sees MFL shifting its focus to gold loans
5) MFL commences foreign exchange business with moneychangers license from RBI.
Later, in 2007, it becomes first NBFC from Kerala to receive AD- II (Authorized Dealer
22
Coimbatore consequent upon takeover of Sterling Gem Finance Pvt. Ltd. MAFIT was
later merged with MAGFIL we.f. April 1, 2008.
7) In a significant breakthrough, MFL attracts institutional funding for the first time when
ICICI Bank sanctions working capital facility of Rs.25 crores under a bilateral
assignment model. Until this point, MFL had been largely dependent on deposits from
the public
8) Singapore government-owned investment fund Fullerton India/Temasek enters the
picture with initial sanction of a credit limit of Rs.50 crores to MFL. Within a year, the
limits are enhanced to Rs.475 crores
9) First NBFC in Kerala to receive foreign institutional investment in December 2007 with
Sequoia Capital and Hudson Equity Holdings investing Rs.70 crores. In November, 2008
more FIIs come in and company raises Rs.70.75 crores. In April 2010, a further Rs.245
crores is raised through the QIP route.
10) Total business volumes of MAGFIL cross the Rs.1, 000 crore milestone in August, 2008.
Remarkably, within the next two years (i.e. by October 2010), total business volumes
cross Rs.5, 000 crores.
11) March, 2010: MAGFIL opens its 1001st Branch at Trissur town. The occasion is
Kerala.
Later,
Pradesh
enhanced capital.
17) Third occasion in the last five years that the company has declared a 1:1 bonus.
June The company adopts a new name, Mannappuram Finance Ltd., in place of the
earlier name Mannappuram General Finance and Leasing Ltd.
23
EFFECTIVE SUMMARY
Gold has long been a valued commodity, particularly in India where it is considered
auspicious, and has been in use for centuries in the form ofjewelry, coins and other assets.
Though gold Isa highly liquid asset, it wasnt 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 moneylenders. However, this
scenario changed with the entrance of organized sector players such as banks and nonbanking finance companies (NBFCs) which now command more than 25% of the market.
The organized gold loan market has grown at 40% CAGR from 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 and charges, banks stand to gain market share at the
expense of NBFCs in the near future.
With rapid growth, regulatory scrutiny has increased on gold loan lending practices. NBFCs
24
25
600
30000
500
25000
5000
20000
100
400
10000
200
15000
300
300
20000
15000
400
25000
10000
200
500
30000
600
35000
5000
100
0
FY02
FY07 FY09
FY10
FY07
private sectors banks
26
FY10
NBFC's
Cooperatives banks
Figure 4 depicts the gold loan portfolio size for key organized sector players, again
highlighting the rapidly growing dominance of NBFCs (e.g., Muthoot Finance,
Mannappuram and Muthoot Fincrop)
27
ROLE OF TECHNOLOGY
Information technology has played an increasingly important role in the rapid growth of the
gold loan market.
Provision of accurate real-time information has led to faster decision making and
reduced turnaround time for
loan disbursals
Technology has significantly reduced human intervention and thereby, the approval,
disbursal and repayment processes have become much faster, simpler and more
robust. Better adherence to lending regulations (KYC,
Priority lending, etc.), consonance in firm-wide lending activities, efficient tracking of
borrower accounts,
Process transparency and minimization of operational costs are some of the major
benefits realized through the use of technology.
Gold loan firms use negligible or small-scale proprietary IT systems. These are proving to be
inadequate given gold lenders strong growth. Hence, firms are increasingly looking to
leverage technology for further growth. They are engaging enterprise solution providers to
provide integrated solutions for loan origination, servicing and collections.
28
29
31
INDUSTRIAL PROFILE
32
Increasing tenders of India consumers to acquired assets such as cars, goods and
houses on credit
Fast emerging middle class and growing number of households in our target
segments
Unproved terms of credit as interest rates in India fall in line with global interest rates
Legislative changes that offer greater protection to lenders against fraud and potential
default increasing the incentive to lender.
Growth in assignment and securitation arrangemwnt for consumer loans has enable
non deposit entites to acces wholesale funding and compete solely on their ability to
originate, underwrite and service consumer loans.
Credit avaibility, affordability and consumer confidence are the key drivers for consumer
loans growth.a varity of financials intermidieries in the public and private sectors participate
in Indias consumers lending sectors, including the following:
Commercial banks
Other specialized financial institutions and state level financial institutions and
The recent economic bomb and crash has sent stock wages throughout the economy, creating
radical change in business paradigms, consumer demands, and even in economical cultures
themselves.one of the greatest change in the developing world has been change in the
peoples relationship with gold. Since the days of the Roman Empire, gold has been seen as
both a designer luxury and emended store of value, and because of its portability and use as
jewellery, gold has been a traditional fashion and saving account for the people in
EasterEurope, India and other foreign countries for a very long time
33
COMPANY PROFILE
Muthoot finance
Muthoot finance is the subsidiaries of Muthoot group was established in 1939, and is
primarily involved in financial sector of our country.
34
We are the largest gold financing company in India in terms of loan portfolio. We provide
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. Our Gold Loan portfolio as of March 31, 2010 comprised
approximately 2.8 million loan accounts in India that we serviced through 1,605 branches
across 20 states and two union territories in India. According to the IMacs Industry Report
2009, as of March 31, 2010 our branch network was the largest among gold loan NBFCs in
India. We have since increased our branch network to 1,921 branches as of August 31, 2010,
and used our branch network to serve an average of 53,989 customers per day in the month of
August 2010. As of August 31, 2010, we employed 12,220 persons in our operations. We are
a Systemically Important Non-deposit taking NBFC headquartered in the southern Indian
state of Kerala. Our operating history has evolved over a period of 70 years since M George
Muthoot (the father of our Promoters) founded a gold loan business in 1939 under the
heritage of a trading business established by his father, Nina Mathai Muthoot, in 1887. Since
our formation, we have broadened the scale and geographic scope of our retail lending
operations so that, as of March 31, 2010, we were Indias largest provider of Gold Loans. In
the years ended March 31, 2008, 2009 and 2010, revenues from our Gold Loan business
constituted 95.97%, 96.71% and 98.08%, respectively, of our total income. In addition to our
Gold Loans business, we provide money transfer services through our branches as sub-agents
of various registered money transfer agencies, and recently have commenced providing
collection agency services. We also operate three windmills in the state of Tamil Nadu. We
issue secured non-convertible debentures called Muthoot Gold Bonds on a private
placement basis. Proceeds from our issuance of Muthoot Gold Bonds form a significant
source of funds for our Gold Loan business. We also rely on bank loans and subordinated
debt instruments as our sources of funds. As of March 31, 2010, we had Rs.27, 192.5 million
in outstanding Muthoot Gold Bonds and Rs.25, 612.7 million in other borrowings. We also
raise capital by selling a portion of our loan receivables under bilateral assignment
agreements with various banks that purchase our portfolio primarily for meeting their priority
sector lending commitments.
35
Our customers are typically small businessmen, vendors, traders, farmers and salaried
individuals, who for reasons of convenience, accessibility or necessity, avail of our credit
facilities by pledging their gold jewellery with us rather than by taking loans from banks and
other financial institutions. We provide retail loan products, primarily comprising Gold
Loans. We also
Disburse other loans, including those secured by Muthoot Gold Bonds. Our Gold Loans have
a maximum 12 month term. Our average disbursed Gold Loan amount outstanding was
Rs.26-, 183.0 per loan account as of March 31, 2010. In the year ended March 31, 2010, our
retail loan portfolio earned, on average, 1.67% per month, or 19.94% per annum. As of
March 31, 2008, 2009 and 2010, our portfolio of outstanding gross Gold Loans under
management was Rs.21,790.1 million, Rs.33,000.7 million and Rs.73,417.3 million,
respectively, and approximately 30.1 tons, 38.9 tons and 65.5 tons, respectively, of gold
jewellery was held by us as security for our Gold Loans . Gross non-performing assets
("NPAs") were at 0.42%, 0.48% and 0.46% of our gross retail loan portfolio under
management as of March 31, 2008, 2009 and 2010, respectively. In the years ended March
31, 2008, 2009 and 2010, our total income was Rs.3,686.4 million Rs.6,204.0 million and
Rs.10,893.7 million, respectively, demonstrating an annual growth rate of 57.56%, 68.29%
and 75.59%, respectively. Our profit after tax in the years ended March 31, 2008, 2009 and
2010 was Rs.636.0 million, Rs.977.2 million and Rs.2,275.7 million, respectively,
demonstrating an annual growth rate of 44.61%, 53.65% and 132.88%, respectively. Our net
worth as of March 31, 2008, 2009 and 2010 was Rs.2, 131.1 million, Rs.3, 614.5 million and
Rs.5, 841.9 million, respectively.
We believe that the following competitive strengths position us well for continued growth:
Market leading position in the Gold Loan business with a strong presence in
under-servedrural and semi urban markets Gold loans are the core products
in our asset portfolio.
36
We are the largest gold financing company in India in terms of loan portfolio. Our
loan portfolio as of March 31, 2010 comprised approximately 2.8 million loan
accounts in India with Gold Loans outstanding of Rs.73,417.3 million
We have the largest branch network among gold loan NBFCs. As of March 31, 2010,
we operated 1,605 branches across 20 states and two union territories in India, and in
the month of August 2010, we served an average of 53,989 customers daily. Our
Branch network has expanded significantly in recent years from 373 branches as of
March 31, 2005 to 1,921 branches as of August 31, 2010, comprising 335 branches in
northern India, 1,322 branches in southern India, 197 branches in western India and
67 branches in eastern India.
We believe that due to our early entry we have built a recognizable brand in the rural
and semi-urban markets of India, particularly in the southern Indian states of Tamil
Nadu, Kerala, Andhra Pradesh and Karnataka. As of March 31, 2010, the southern
Indian states of Tamil Nadu, Kerala, Andhra Pradesh and Karnataka constituted
75.38% of our total Gold Loan portfolio.
We offer products with varying loan amounts, advance rates (per gram of gold) and
interest rates. The principal loan amounts we disburse usually range from Rs.2, 000.0
to Rs.100, and 000.0 while interest rates on our Gold Loans range between 12.00% to
30.00% per annum.
37
38
Mannappuram origins go back to 1949 when it was founded in Val pad (a coastal village in
the Trissur District of Kerala) by the late V.C. Padmanabhan, father of Shri Nandakumar. Its
activity was mainly pawn broking and money lending carried out on a modest scale. The
principal asset of the company was the integrity and foresight of its Founder and among the
people of the area it soon acquired a reputation as a safe-haven for their investments.
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. Mannappuram Finance Ltd. was incorporated in
1992 (the original name was Mannappuram 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 recognized 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 3,300 branches across 26 states and UTs with Assets
under Management (AUM) of about Rs.10, 000 crores, a workforce of about 18,000 and a
live customer base of 15 lakhs (Data as of 31 March, 2013).
The many achievements: Soon after it commenced its operations, Mannappuram Finance
Limited gathered several "firsts" to its credit. The company was the First NBFC in Kerala to
receive a Certificate of Registration 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, recognizing the
company's ability to make timely repayments of the principal and interest under its then
existing public deposits programmer. Mannappuram 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.
39
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, Mannappuram 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, Mannappuram Finance Limited has also
ventured into the Foreign Exchange business with the Reserve Bank of India having granted
an Authorized Dealer - II license 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 Change, Wall Street and MoneyGram.
Human Resources: As an organization that prides itself as a pioneer and innovator,
Mannappuram Finance Ltd derives its strength from the dedication of its highly motivated
staff. Right from inception, the company has been keen to spot and nurture the best available
talent. The HR department of the company places emphasis on professionalism and in honing
the skills of employees to maintain the edge in a competitive world. The company has a fullfledged training establishment where in-house training courses are regularly conducted in a
professional manner to upgrade skills and to enhance functional efficiency. Moreover, the
company sponsors an MBA degree programmer for its employees who have completed five
years of service keen to upgrade their professional skills and qualifications.
The vision: Within the next decade, Mannappuram Finance Limited hopes to emerge as the
largest player in the gold loan sector in India and also to expand its footprint beyond national
borders. The long term vision of the company is to unlock the value of India's large stock of
privately held gold (estimated at about 18,000 tons) to the benefit of the common people of
India, most of who possess savings in the form of gold jeweler. This is neatly summed up in
the Company's corporate tagline, "Energizing gold, empowering people".
40
41
Minimal documentation
Being Indias largest gold loan service provider, safeguarding the deposits of gold ornaments
is our primary concern. A flexible interest rate policy is what helps us cope with volatile
markets. Our gold loan range starts from Rs. 1,500 and stretches up to Rs. 1 Crore. Serving
over 81,000 customers daily, we assist almost every section of the society in obtaining quick
42
Mannappuram finance
Muthoot finance:
SCHEME
SLAB PERIOD/S
Upto 1 month
>1 Upto 3 months
Upto 12 months
Upto 12 months
Upto 3 months
12 months
43
Mannappuram finance:
SCHEME NAME
LOAN TENURE
SLAB
0 - 30 days
GL-SY Scheme
180 Days
31 - 60 days
61 - 180 days
Privilege Loan
(GL-PL)*
90 Days
0 - 90 days
90 Days
0 - 90 days
90 Days
0 - 90 days
Xpress Loan
(GL-XG)
Value for Money
(GL-VM)*
0 - 30 days
180 Days
31 -60 Days
61-180 days
0 - 60 days
270 Days
61 -180 Days
181-270 days
0 - 30 days
Super Loan
(GL-SG)
270 Days
31 -90 Days
91-150 days
151-270 days
0 - 30 days
365 Days
31 -90 Days
91-150 days
151-365 days
0 - 60 days
61 -90 Days
365 Days
91-120 days
121-180 days
181-365 days
GL B1-N
90 Days
GL B1+N
90 Days
GL B2+
90 Days
GL B3+
180 Days
44
0 - 60 days
61 - 90 days
0 - 60 days
61 - 90 days
0 - 60 days
61 - 90 days
0 - 90 days
91 - 180 days
Mannappuram finance
Application form
KYC norms
ID proof
Address proof
ID proof
Address proof
45
ROI
Mannappuram finance
ROI
14%
B1+N
19.33%
24%
B2+
17.33%
22%
B3+
21%
(MBL)
Muthoot Mahila Loan
(MML)
Muthoot Super Loan (MSL)
Muthoot Premier Loan
(MPL)
-Muthoot Advantage Loan
(MAL)
Muthoot Overdraft scheme
(MOS)
21%
25.25%
18%
25%
19%
21.67%
24%
22.66%
23.77%
Xpress loan
25.50%
(GL-XG)
46
Mannappuram finance:
Postage charges:
Loans
Up To Rs.10,000/-
Loans
Above Rs.20,000/
90
120
150
Muthoot finance
Mannappuram finance
47
BY
RBI
FOR
PROVIDING
GOLD
LOAN
TO
COSTUMERS?
Muthoot finance
There are many restrictions and regulations provided by RBI which all NBFCs has to follow:
a.
NBFCs cannot sanction above 75% of the loan amount of actual amount of
total gold ornaments pledged.
b. Interest rate charged by bank should not exceed 22%( as per RBI)
c. Gold is permitted only against gold ornaments (for eg. Jewellerys etc.). Gold
coins, gold biscuits, gold bars cannot be pledged for getting loan against gold.
d. KYC norms should be strictly complied, if not can be punishable according to
act.
48
49
Muthoot finance
Muthoot finance have a strong room in which the pledged gold ornaments of costumers are
kept. Regular checking of gold ornaments are done through banks.
Mannappuram finance
Mannappuram finance have a safe vault in a safe room in which the gold ornaments are
pledged.
Mannappuram finance:
Muthoot finance, Muthoot fincrop, IIFL, private banks, co-operative banks, public sector
banks.
50
Employees
Approx. salaries
28000
3 accounts staff
12000-15000
12000-13000
2 security guards
9000
Mannappuram finance:
5-6 person per branch of average salaries 12000.
Client details
51
Address details
IP photograph (we browse the photo of customer and gold items one by one
After fill all these details press save GOLD LOAN number will be generated
When the gold loan number will generated please ensure before doing further process
deduces must be done
If there is any deviation (in terms of ROI, per gram rate and valuation %age)so, it
should enter in to the client details as the first stage
Now again we have to fill the details a s under
Appraisal form
Cash disbursal
Bank details
(Appraisal form : Valuer I Before start anything we have to press on + then enter all the
information like item, Gross weight , Net weight, per gram weight after filling these
information press save this process should be repeated for each and every item by Valuer I
Valuer II: now the above noted process should be repeated by Valuer II also when we enter
the all information on appraisal form finally press the Edit and then Save.
Cash disbursal: first press + then enter the denomination of cash to be disbursed to the
customer then press disburse cash finally we press Edit and Save.
Bank details: there is no need to fill bank details in the case loan is less than 10 laces, on the
other hand if loan above 10 laces then press add new then enter the details then press Edit
and save.
Now we should give the print command and get the hard copy for customers signature the
print will generated the following document on six pages.
Application form
DPN
Appraisal form
Declaration form
52
Token card original should give to the customer and take Xerox for office
record.
Total 11 signature are obtaining form the customer on the above documents we should
give three documents to the customer
Borrower copy
Token card
Cash receipt
Now we should generate/ complete the following document and upload the same along
with the five documents for sanctioning of the loan.
I.D proof
Address proof
Pan card (in the case of above loan is 50000) TVR from CPV report
53
Yes
11
92
No
1
8
RESPONSE
8%
yes
no
92%
Analysis: - from the above graph it is clear that 92% of the population are
aware about the gold loan and 8% 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. It may be
because of in the society they live and due to modernisation.
54
Friends
Wall
Direct
painting
marketing
Response
12
29
29
12
12
Option
Newspaper
Banners
and
TV
relatives
response
6%
12%
12%
12%
29%
29%
wall painting
direct marketing
newspaper
banners
tv
Analysis:-It is clear from the table that 12% of the aware only because of TV
advertisement,
and family.
Option
Yes
No
Response
11
92
response
no
yes
6
response
10
12
Analysis: - from the above graph we can see that 8% of the population have
deal and 92%have not deal in gold
.
Interpretation: - from the above graph we can see that most of the people are
not dealing in gold loan and very few are dealing with gold loan. Inspite of been
heard about gold loan, never dealt with. This can be because of human nature in
point of gold ornaments pledging
56
Option
Response
%
Yes
No
11
92
no
8%
92%
Analysis: - from the above graph we can see that 8% of the population want to
deal in the gold loan in future and rest of 92% dont want to take.
.
Interpretation: - from the above graph we can see that most of the people do
not want to deal in gold loan in future and very few are dealing with gold loan.
Inspite of been heard about gold loan, never dealt with. This can be because of
human nature in point of gold ornaments pegeding. Indians are very
conservative in nature in part of gold ornaments. So many people do not take
gold loan, prefer personal loan
57
Muthoot
Muthoot
Manappuram
Federal
finance
fincrop
finance
bank
Response
75
17
Option
others
COMPANIES
muthoot finance
muthoot fincorp
mannappuram finance
federal bank
others
17%
0%
8%
0%
75%
Analysis: - from the above graph it is clear that 75% of the population wants to
deal with Muthoot finance, 17%are dealing with other companies and few are
dealing with manappuram finance and leasing limited, Muthoot fincrop, future
group
Interpretation: - from the above graph it is clear that most of the customer are
dealing with Muthoot finance and other companies. And very small are dealing
with Mannappuram, Muthoot fincrop
58
Option
Rate of
interest
Flexibility
Costumer
Less
dealing
documentation
Others
Response
58
25
17
PREFERANCE
rate of interest
flexiblity
costumer dealing
17%
loss documentation
others
0%
0%
25%
58%
Analysis:-from the above graph it is clear that 58%of the population are
preferring only because of rate of interest ,25%are because of flexibility,17%are
because of less documentation required in gold loan
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 flexibility and vary few are less documentation. So rate of interest
and flexibility also plays an important role in gold availing.
59
Option
Yes
No
Response
34
58
yes
CURRENT DEAL
1
8%
no
4
34%
Analysis- from the above graph it is clear that 58 % of the population have not
taken the gold loan in their life but majority of are aware of gold loan existence
and 34% of the population are not satisfied
Interpretation: - from the above graph it is clear that most of the population
have not taken gold loan so satisfaction is not preferable here, and some are
satisfied with their current deal.
60
Rate of
Maximum
interest
rate
Response
67
17
Option
Flexibility
Costumer
dealing
Others
SATISFACTION FACTOR
rate of interest
maximum rate
costumer dealing
others
flexibility
8% 0%
8%
17%
67%
Analysis:-from the above graph it is clear that 67%of the population are
satisfied only because of rate of interest 17%are because of max per gram rate,
8% are because of good customer dealing and flexibility and very 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.
61
COMPANY?
Option
Yes
No
Response
25
75
company change
25%
yes
no
75%
Analysis: - from the above graph it is clear that 25% of the population want to
change their company and 75%of the population do not want to change.
Interpretation: - from the above graph it is clear that most of the population
dont want to change their company and very few want to change the company.
62
Option
Response
%
Yes
No
10
83
17
MUTHOOT AWARNESS
yes
no
17%
83%
Analysis: - From the above graph it is clear that 83% of the population are
aware about the Muthoot finance and 17%of the population are not aware about
the Muthoot finance
Interpretation: - From the above graph we can see most of the population are
aware about the Muthoot finance but still the rates of those people are also high
who are not aware about the Muthoot finance .the Company can take many
measures to promote their company so that the numbers of not aware can know
the company.
63
LEASING LIMITED?
Option
Yes
No
Response
58
42
MANAPPURAM AWARNESS
yes
no
42%
58%
Analysis: - from the above graph it is clear that 58% of the population are
aware about the manappuram finance and 42%of the population are not aware
about the manappuram finance.
Interpretation: - from the above graph we can see most of the population are
aware about the Manappuram finance but still the rates of those people are also
high who are not aware about the manappuram finance. The Company can take
many measures to promote their company so that the numbers of not aware can
know the company. But still the number is far away from Muthoot awareness.
64
FINANCE LIMITED?
Option
Yes
No
Response
11
92
branch visit
yes
no
Analysis: - from the above graph it is clear that 92% of the population have not
visited the Muthoot finance branch and 8%of the population have visited
Muthoot finance branch.
Interpretation: - from the above graph we can see most of the population have
visited Muthoot finance branch but still the rates of those people are also high
who Have not visited the Muthoot finance branch. The company can promote
and launch various offers and schemes so the people can visit the branch which
can extend their profit.
65
Option
Response
%
Yes
No
11
92
branch visit
yes
no
Analysis: - from the above graph it is clear that 92% of the population have not
visited the Manappuram finance branch and 8%of the population have visited
Manappuram finance branch.
Interpretation: - from the above graph we can see most of the population have
visited Manappuram finance branch but still the rates of those people are also
high who Have not visited the Manappuram finance branch. The company can
promote and launch various offers and schemes so the people can visit the
branch which can extend their profit.
66
FINDINGS
The present study comparative study on gold loan w.r.t Muthoot finance and
The management and employees of both the companies maintain good relationship.
Most of the respondent and employees have monthly income range between 900028000(Muthoot finance) and 10000-15000(mannappuram finance)
Schemes of both companies differs and also differs the consumer interest in
companies. Mannappuram finance has more schemes than Muthoot finance have.
NBFCs score over banks on two fronts despite charging higher interest- quick
approval and disbursal of loan, and less documentation. An NBFCs at most takes
30minutes to give the loan after verifying the gold, and the document required is only
identification proof of the person pledging the gold.
It is found that the processing charges are less of mannappuram finance than the
Muthoot finance were, tenure of the loan remains same if both companies but the
maximum loan amount differs in case of Muthoot finance in 1 crore and
mannappuram finance is 25 lakhs.
67
It is found that the security standards of gold pledged is very strong. Both the
companies maintain safe vault and strong room for costumers gold ornaments
RBI gives regulation and restrictions in part of gold loan offering viz. gold coins and
gold bars cannot be pledged for loan etc. strictly KYC norms should be followed.
The study was also aimed at finding the best gold loan financing companies. After
analyzing and interpreting the data from primary and secondary sources the following
finding are:
The estimated gold loan portfolio of Muthoot finance limited (21618 crores) is far
superior to mannappuram finance and leasing limited(475 BN) which indicates the
sound financial positions of Muthoot finance limited
The interpretation of data also indicated that the public is more satisfied with the
interest rate offered by Muthoot finance limited over manappuramfinance and
leasing limited. This might be result of experience in the gold loan market and its
objective to provide gold loan at the cheaper and affordable rates.
It also indicate that both the companies are one of the others competitors and so
are other companies.
As per the primary data collected by visiting the banks, it has been interpreted that
manappuram finance and leasing limited lacks bit in infrastructure side if business
and management part. Muthoot being the more established among the two knows
the infrastructure requirements.
It is also interpreted that the manappuram finance is having more facilities like
rebate on interest paid early and same has charges on overdue of interest paid to
bank so as Muthoot has.
It is also known that the net NPAs (non-performing asset)of the Muthoot finance
34351 lakhs and manappuram finance is having net NPA is 822 million.
68
They should take up more promotional measure to increase the market shares of the
product
They should concentrate on the interest rates offered by them to costumers in various
schemes
Most of the people are unaware of Manappuram finance and their schemes so should
work on promotional measures of marketing of gold loan schemes
The company can also give the attractive offers to old costumers as well as new
costumers
Constant increasing in NPA was seen in previous years , company should take suitable
measures to decrease the total NPAs
Company should improve little bit of infrastructural facilities and asset in the
branches in some areas.
69
The comparative study of gold loan between Muthoot finance and manappuram finance was
aimed at finding out the reasons which makes these two companies stand out among other
gold loan financing companies and also to identify best gold loan provider among these two
financing giants.
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 dont 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 gold loan offering companies needs to endeavor with maximum efforts
the company can achieve several milestones in future while maintaining the existing
customer relationship. From these project we can understand which companies is most
preferable to avail gold loan
It helped me to find out different factors responsible for the success of these two companies.
The major finding that can be conducted form this study is that Muthoot finance limited is
still best gold financing company in India and its toughest competitor manappuram finance
limited still lacks in many areas although it has grown rapidly in the past few months
This experience has helped me gain knowledge about the business of gold loan financing in
India
70
Bibliography
Bibliography
Webiliography
WEBSITES
gold-loan-
companies%5cgrowth-crisil/161230/on
Http://www.muthootfinance.com/services/gold-loan.html
Http://thegoldwatcher.blogspot.com/2011/05/indian-gold-loan-marketexpanding.html
DOCUMENTS
Boney hector dcroz document on gold loan
Muthoot finance documents
71
Annexure
Sample Questionare
Muthoot finance
QUESTIONARE
(For manager)
1) What are the various schemes provided under gold loan by your bank?
3) What is eligibility criteria for applying gold loan? Having an account with the bank is
mandatory for getting loan?
72
6) Which software is used by your bank for opening an account of gold loan?
8) What are the restrictions and regulations given by RBI for providing gold loan to
costumers?
9) How the gold loan product is marketed or promoted? What are the mediums of
marketing gold loan schemes?
73
10) What are the steps for testing the purity of gold?
11) What are your safety measures for gold ornaments pledged?
13) How much employees are working in gold loan department? What is average salary
of the employees?
14) How much gold rates fluctuations affect you gold loan business and interest rates?
74
QUESTIONARE
(For normal people)
Dear sir/madam,
I am the student of S.K somaiya Degree College of arts, science and commerce and I am
conducting a survey on comparative study on gold loan. The following Questionare
has been drafted to make me understand the need and awareness of the costumer. Therefore I
request you to spare sometime and provide me the following information. I assure you that
this data will not be misused and will only be used for the project purpose.
Name:
Occupation:
Age:
Contact no.:
Email: -
______________________________
______________________________
______________________________
______________________________
______________________________
a. Yes
b. No
a) TV
relatives
a) Yes
b) No
a) Yes
b) No
75
6) Which of the following is most preferable thing at time of availing gold loan?
7) Are you satisfied with current deal (if gold loan taken)?
a) Yes
b) No
a) Yes
b) No
10) Are you aware about Muthoot finance /mannappuram fianc gold loan?
a) Yes
b) No
11) Have you ever visited any branch of Muthoot finance/Mannappuram finance?
a) Yes
b) No
76