Gold financing companies are witnessing significant gains during Thursday’s trading session after the Reserve Bank of India announced a 50-bps cut in the repo rate to 5.5 per cent, with RBI Governor Sanjay Malhotra also clarifying loan-to-value ratio norms for small borrowers.
Muthoot Finance Limited is trading up 6.84 per cent at ₹2,451.60, while Manappuram Finance has gained 5.16 per cent to ₹246.68. Muthoot Capital Services is up 4.17 per cent at ₹302.50 and Shriram Finance has climbed 5.65 per cent to ₹688.25. The rally came after Malhotra clarified that the loan-to-value ratio for small borrowers up to ₹2.5 lakh will be raised to 85 per cent from the existing 75 per cent.
The RBI governor emphasised that the norms were intended to provide clarity to existing regulations and ensure compliance by financiers. He noted instances where some non-banking financial companies had provided loans with LTV ratios as high as 88 per cent. The higher LTV ratio on both principal and interest will give NBFCs more flexibility to extend additional loans against the same gold collateral.
Industry leaders welcomed the monetary policy decision, viewing it as a catalyst for the upcoming gold-buying season. Colin Shah, Managing Director of Kama Jewelry, described the rate cut as an “encouraging step” that should boost sentiment across sectors. He noted that the GDP forecast maintained at 6.5 per cent and inflation cooling to 3.7 per cent from 4 per cent for FY26 demonstrates the economy’s progress on both growth and inflation fronts.
Renisha Chainani, Head of Research at Augmont, said lower interest rates could ease financial pressures for businesses and individuals while spurring growth. She emphasised that gold remains a trusted store of value with enhanced savings potential.
Aksha Kamboj from the India Bullion and Jewellers Association characterised the RBI’s policy as a “double-edged opportunity” that encourages consumer spending during key occasions while strengthening investor confidence in gold. However, she cautioned that increased liquidity could pressure the rupee and make imported gold costlier.
The industry expects the policy stance to maintain gold’s steady upward trend, benefiting the bullion sector while requiring strategic planning around inventory and pricing. With the traditional gold-buying season approaching, strengthened purchasing power due to softened inflation is expected to reinforce jewellery demand.