Pre-Budget Expectations: George Alexander Muthoot, MD, Muthoot Finance

The forthcoming union budget is poised to chart the course for the new Indian government’s economic growth agenda. On the back of the political stability and resilient economy, it is expected to provide relief to various sections of the society and benefits for various sectors. The budget 2025 has the opportunity to help provide the NBFC sector and retail investors with the much needed impetus. Below are a few recommendations where government support will go a long way in providing last-mile credit.

Wishlist as a gold loan NBFC

As a prominent player in this sector, we would like to continue to advocate 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 the small borrowers whose borrowing needs are frequently less than Rs 50,000. We also propose for 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 the NBFCs are allowed to link with the UPI payment system, this will act as a secured credit that would be extended by NBFCs at a lower interest rate (12%-18%) compared to the high interest rates (around 36%) charged by credit cards.

We further seek a level playing field by bridging the disparity and aligning the single counterparty exposure limits for gold loan NBFCs in comparison with other NBFCs i.e. 20% of Tier-1 capital. This restriction impacts the ability to lend credit and negatively impacts our potential customers.

Wishlist for our retail NCD investors

With the growing impetus on diversifying the funding mix of NBFCs, we would urge the regulators and government to simplify the taxation 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 the TDS were introduced on listed securities keeping in mind that the customers are not paying the tax, however on ground there is an adequate trail of holders and interest payments. Our other recommendation is for allowing additional interest rate 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 compensations to all our investors and stakeholders.