Shares of Manappuram Finance and Muthoot Finance sank on Thursday amid media reports that the Reserve Bank of India (RBI) was planning to regulate the gold loan business.
The central bank is reportedly considering tighter regulations for the segment.
This is could be in the form of limits on the loan that a gold loan finance company can give as a percentage of the value of gold, one media report said. This is also known as the loan-to-value.
The RBI may also restrict the maximum interest that a gold loan finance company can charge from its customers, and also the penalties that it can impose, the report added.
Manappuram Finance lost nearly 7% to close at Rs 45.90 after being as low as Rs 45.25.
Close to 30 lakh shares changed hands on the counter on BSE today versus two-week average of 13.44 lakh shares.
Muthoot Finance dropped 5.6% to close at Rs 160 after touching a day's low of Rs 158. Total traded quantity on this counter stood at 1.82 lakh shares on BSE vs. a two-week average of 82,000 shares.
On Tuesday, the RBI barred Manappuram Finance from accepting accept public deposits, as it found that the company had outstanding fixed deposits issued in the name of a privately-owned promoter firm.
This led to a 20% fall in the stock price on Wednesday.
Domestic debt rating firm CRISIL has placed Manappuram Finance on 'rating watch' after the RBI pulled up the company for accepting public deposits.
The rating agency is analysing the potential impact of the regulatory and governance issues highlighted by RBI on the company's credit risk profile.
Manappuram Finance said on Tuesday that its Board will meet on February 10 to discuss the RBI notice.
The Board will also discuss measures to improve its corporate governance at the meeting, the company said in a statement.