A persistent slowdown in the Indian economy may be leading to a surge in gold mortgaging, said George Alexander Muthoot, MD of Muthoot Finance.

Talking to CNBC-TV18, Muthoot said that the company's business was better in December quarter as compared to second quarter.

“This quarter is expected to be better in terms of business growth than the September quarter period as issues in non-banking financial companies (NBFCs) sector are now behind. Further, we have also raised adequate funding in the last two months," said Muthoot.

"We are on target to achieve our earlier guidance of 15 percent growth on the gold loan for FY20 or even more,” he added.

The company expects lower cost of funds from banks going ahead.

“We are competing with the banks for the last several decades. The advantage for NBFCs is that gold loan are all very small. The average ticket size is only Rs 40,000,” he mentioned.

The company's net interest margin (NIMs) are at around 10 percent and expects to keep it constant going forward.

However, the NBFC may reduce the interest rates on loans if the cost of fund comes down, but without hurting the NIMs.

Further, on the Mutual Fund business, Muthoot said, “We don’t think it to be as profitable as gold loan business but then this is a service which we should be providing to our customers on the liability side. We don’t need to invest lot of capital into this.”

First Published:Dec 23, 2019 12:19 PM IST