It gives me great pleasure to present the 16th Annual Report of Muthoot Finance
Muthoot is a firm believer of inclusive development. Dr. C. Rangarajan committee on
Financial Inclusion defines financial inclusion as " the process of ensuring access
to financial services and timely and adequate credit where needed by vulnerable groups
such as weaker sections and low income groups at an affordable cost." It is one of
the most critical aspects of growth and development of the country. Financial inclusion
can not only bring tremendous gains to the disadvantaged, but also can contribute to the
creation of a more vibrant and stable financial system thus benefitting the society as a
whole. In India, the focus of financial inclusion mainly veered around integration of
rural India into the banking fold. The challenges which have been faced on this have been
many-folds like large area, high cost of small value transactions, weak delivery model,
unsuitable products, lack of proper infrastructure availability, low return on investment
and customer behaviour preventing expansion in these areas. Hence, our country has a long
way to go in achieving 100% financial inclusion.
Banker to the Unbanked
Over the years, Muthoot ventured into the last mile of the remotest rural areas of
India and reached out to those millions of Indians who were in dire need of funds for
either business or personal purposes. Muthoot facilitated the aam aadmi living
in rural and semi-urban areas, who do not have access to organised credit with immediate
financial assistance. Built brick by brick with ethics, values, reliability,
dependability, transparency, goodwill and integrity , we considered thousands of rural
Indians as perfectly bankable, even before the term financial inclusion was
coined, became the sole connect for people living in small villages and thereby playing a
big role in financial inclusion.
This venture enabled Muthoot Finance to successfully migrate people from the
unorganised sector to the organised sector saving them from the clutches of unorganised
money lenders. It also brought thousands of rural and semi-urban Indians into the
organised credit for the very first time. Moreover, it provided every Indian a share of
the much talked about economic growth and freedom through their untapped valuable asset.
Since 1950s, the Company had been assisting the general public of Kerala and
surrounding areas for going abroad to Countries like Ceylon, Malaysia, Singapore and Gulf
to seek employment. It was Muthoot, who came to their financial assistance in aiding them
for applying for air tickets and visa when no other organised player was willing to fund
them. Today, these NRIs are a major contributor for sending NRI funds which is a major
source for development of the State of Kerala and also foreign exchange contributor to the
A pioneer and leader in the sector, Muthoot Finances revolutionary steps in
promoting loans against household gold jewellery with the least hassle and documentation
has today changed the concept of gold loan from a last resort or
desperate loan option to a life style banking product.
The Company became the sole connect for the economically weaker section, lower middle
class and middle class living in rural-like semi-urban areas. Customers come confidently
and pledge their family gold with us, which was once looked down upon by many as a social
The Groups 126 years of unblemished track record is a testimonial in itself.
Today, Muthoot Finance has a customer base of over 6 million and serves around 80,000
customers a day.
During the year under review, Muthoot recorded a growth of 18% in revenues, rising from
Rs 4,549 Crores to Rs 5,387 Crores. Net Profit grew at 13% crossing another major
milestone at Rs 1,004 Crores over the Rs 892 Crores achieved in fiscal 2012. The
branch network also witnessed a growth of 11%, enabling wider presence across the length
and breadth of the country at 4,082 branches across 21 states and 4 Union Territories.
These achievements become all the more impressive when we consider the challenging
environment which prevailed throughout the last financial year brought about by regulatory
changes and sentiment-driven market speculations.
K.U.B. Rao Committee Report of the Reserve Bank of India has driven out undue
uncertainties about the sector and exonerated the sector from the negative perceptions
that crept into the minds of various stakeholders. The report categorically says that Gold
Loan is a socially useful function and that it provides a strong rationale for careful
regulation of the activities. At a time, when financial inclusion is a major policy goal,
the services rendered by the gold loans NBFCs, which are a part of the organised loan
market are contributing in a reasonable measure to cater to the borrowing requirements of
a needy section of the society. Further, Gold loans have only a casual impact on gold
imports of the country, substantiating the emergence of a liquidity motive for holding
In India, buyers do not borrow to further buy gold and thus gold loans do not drive up
the imports. Further, an increase in gold loans extended by NBFCs and banks does not
impact significantly, the gold price in India.
Thus, going forward, the industrys prospects are appearing very bright on the
back of much clearer environment, stable regulations, easier liquidity, benefits of
operating leverage on account of economies of scale and larger customer base.
There is tremendous scope of growth, given the size of the domestic stock of gold
available in the country. About 65% of gold holding is located in rural areas, making them
a potential growth driver for financial inclusion. Driving on the product market niche
created by them, the NBFCs led by Muthoot Finance are likely to maintain their due share
of business inspite of competitive forces. The growth enablers are aplenty, given the
potential for higher branch leveraging and new customer additions.
For the economy, it is very crucial that the idle gold stocks are monetised for
productive purposes to the maximum extent possible. The issue of the rising gold demand in
India is indeed very critical and complex. Although, the gold and loan practices in the
country are still primitive and largely unorganised, it plays a key-role in the Indian
economy. Therefore, it is of utmost importance to transform the critical gold segment into
an organised sector through the strengthening of institutional infrastructure.
Heart for Cause
We, at Muthoot have always believed that our success is meaningless unless the
communities that we serve, too are thriving. Thus, we continued to serve the society under
the umbrella of Muthoot M George Foundation. At Muthoot, we have thus been
catering to the needs of poor and the underprivileged in the best manner possible.
Note of Appreciation
Success can be achieved only through a collective effort. I would like to take this
opportunity to thank all the stakeholders for collectively making the Company what it is
today and hope it reaches greater heights. On account of a commendable performance, Board
of Directors would like to announce a dividend of 45% for the FY 2013.
M.G. George Muthoot