MICROCAPITAL BRIEF: National Housing Bank (NHB) of India Approves Muthoot Finance to Offer Home Mortgages

The National Housing Bank (NHB), the Indian governmental agency that oversees housing finance, reportedly has granted Muthoot Finance, an Indian non-banking finance company (NBFC) that lends using gold items as collateral, approval to begin providing housing finance services. One stated motivation of the move is concern expressed by the Reserve Bank of India (RBI) with regard to the risk posed to businesses concentrated solely in the gold market. Although Muthoot expressed plans to boost its enterprise lending in 2013, details on that process are not available. With the new approval from NHB, Muthoot will focus on providing financing in the affordable housing sector in an attempt to “leverage opportunities to finance the housing needs of [the company’s] existing customer base.” According to a statement attributed to Mr K.P. Padmakumar, the executive director of Muthoot, the firm expects to roll out housing finance services by September 2014 [1].

As of 2013, NHB reported total reserves and surplus of INR 31.9 billion (USD 531 million) and refinance disbursements of INR 175 billion (USD 2.9 billion) [2]. As of the same year, Muthoot Finance, which also offers money transfers, reported total assets of INR 294 billion (USD 4.9 billion), approximately 4,000 branches and 26,000 employees in India [3].

By Benjamin Krupp, Research Associate

About National Housing Bank (NHB)

The National Housing Bank (NHB) was established under an act of the Indian Parliament in 1988 with the purpose of functioning as the principal agency promoting housing finance institutions (HFIs) in India. NHB is wholly owned by Reserve Bank of India (RBI), the country’s central bank. NHB is mandated to issue directions to housing finance institutions to encourage their growth and formulate schemes for mobilizing credit and other resources for housing.

About Muthoot Finance Limited (Muthoot Fincorp)

Established in Kochi, India, in 1887, Muthoot Finance Limited (Muthoot Fincorp) is a gold financing company that provides personal and business loans secured by gold jewelry. The company also offers collection services and money transfer services as sub-agents of various registered money transfer agencies. As of 2014, Muthoot Finance has received approval from the Indian government to begin offering housing finance. As of 2013, Muthoot Finance reported total assets of INR 294 billion (USD 4.9 billion), approximately 4,000 branches and 26,000 employees in India.

Sources and Additional Resources

[1] Financial Chronicle: Muthoot Finance Gets Nod for Housing Loan Business

[2] National Housing Bank: Annual Report 2012-13

[3] Moneycontrol.com: Muthoot Finance Annual Report 2012-13

MicroCapital, August 28, 2013: World Bank Group, National Housing Bank, Government of India Signs $100m Agreement for Low-Income Housing Finance Project

MicroCapital, April 22, 2013: Muthoot Fincorp of India to Offer $19m in Non-Convertible Debentures to Fund Continued Diversification from Gold Loans to Microfinance

MicroCapital, December 13, 2010: Muthoot Fincorp, ACCION International Join to Increase Microfinance Lending in India

MicroCapital, June 23, 2008: India’s National Housing Bank and Repco Bank’s Foundation for Micro Credit (RFMC) launch a $23.3m “Housing Microfinance Initiative” for Rural Self-Help Groups

MicroCapital Universe Profile: National Housing Bank (NHB)

MicroCapital Universe Profile: Muthoot Finance Limited (Muthoot Fincorp)

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