Loans against Gold ETF Units to be offered by Muthoot Finance

Recently, Muthoot Finance Ltd announced to offer loans against Gold ETF (Exchange Traded Funds) units as security. The Company claims to be the largest gold finance NBFC in India.

An online news portal about business and economy - economictimes.indiatimes.com quotes a statement of Muthoot Finance Ltd Managing Director George Alexander Muthoot about loans against gold ETF units,

“loans against gold ETF units was a scheme through which Muthoot Finance plans to venture into a totally new segment of gold financing, which would not only add value, but also enable the company to service the financial requirements of newer customer segments.”

Further he adds,

“The new scheme would come into force by this month end and would enable the customers to avail finance at the rate of 15 per cent interest against their Gold ETF units to the extent of 85 per cent of the Net Asset Value of ETFs.”

The news portal quotes a statement of Sunita Anand also who is National Stock Exchange Assistant Vice-President and Southern Region Head,

“Gold ETFs have seen a progressive rise in popularity throughout the country over the past two to three years, attaining a whopping size of over Rs 5,000 crore as of June this year, resulting out of active investments from over 320,000 investors.”

In an analysis of the fund, the news portal writes,

“Commonly referred as 'paper gold', gold ETFs are mutual fund units issued by asset management companies against 99.5 per cent purity physical gold deposited with a SEBI-registered custodian.

These funds are passively managed and mirror domestic gold prices. By enabling investors to invest in gold without holding it in physical form, gold ETFs offer a rather unique investment opportunity to investors.”

So, essence of the gold ETFs offer is giving a rather unique investment opportunity to investors by Muthoot Finance Ltd. It is introduced just after Loan against Gold Units of Reliance Commercial Finance.