Budget 2024: Gold loan NBFCs need 'Priority Sector' status: Muthoot Finance MD

In the upcoming union budget, MD of Muthoot Finance anticipates that the Budget 2024 has the potential to deliver a boost to the NBFC sector and retail investors, providing the much-needed momentum for progress. George Alexander Muthoot, MD, Muthoot Finance, says, "We would like to continue advocating to provide cushion and offer maximum benefit to customers by urging the government to grant eligible gold loan NBFCs with ‘priority sector status’. We believe that providing priority sector status to eligible gold loans NBFCs will be a step forward in driving financial inclusion, as it majorly impacts small borrowers whose borrowing needs are frequently less than ₹50,000. We also propose a ‘Gold linked credit line via UPI’ that can go a long way in helping households/small business owners meet their financing needs and monetise idle gold jewellery. Once NBFCs are allowed to link with the UPI payment system, this will act as secured credit extended by NBFCs at lower interest rates (12%-18%) compared to the high interest rates (around 36%) charged by credit cards."

Muthoot states that they also aim to achieve fairness by reducing the gap and aligning the single counterparty exposure limits for gold loan NBFCs with those of other NBFCs, specifically at 20% of Tier-1 capital. They argue that this restriction affects their credit lending capacity and has a detrimental effect on potential customers.

Highlighting the need to simplify taxation compliance on TDS, MD of Muthoot Finance says, "With the growing impetus on diversifying the funding mix of NBFCs, we urge regulators and the government to simplify tax compliance on the TDS on listed NCDs which is currently at 10% TDS. The selling and re-selling of listed NCDs through stock exchanges ends up putting a taxation burden on the end investor. Since TDS was introduced on listed securities keeping in mind that the customers do not pay the tax, however on ground, there is an adequate trail of holders and interest payments."

"Our other recommendation is to allow additional interest rates on Public Issue of Secured Non-Convertible Debentures (NCDs) issued to retail investors, pensioners and senior citizens, over and above the interest rate applicable to institutional investors. We believe these regulations are crucial in order to attract more retail investors and ensure fair compensation for all our investors and stakeholders," he adds.