Muthoot Finance Ltd Management Discussions

Economic overview

Global economic overview

The global economy grew an estimated 3.4% in 2025, held up by steady consumption in the United States, an investment cycle building around artificial intelligence, and the gradual easing of trade policy tensions over the second half of the year.? That momentum broke in late February 2026 with the outbreak of war in the Middle East, which disrupted energy infrastructure and shipping through the Strait of Hormuz and left the near-term outlook materially more uncertain.

The conflict has worked through the wider economy along three channels: higher energy and energy-linked input costs, firmer consumer inflation expectations, and a flight to safe-haven assets, gold among them that has strengthened the US Dollar and widened risk premia across financial markets. On this footing the IMF expects global growth to slow to 3.1% in 2026 before a modest recovery to 3.2% in 2027, with headline inflation rising over the coming year and easing thereafter as the immediate commodity-price shock fades.? The sharpest downgrades fall on commodity-importing economies, most acutely across the Middle East and North Africa, where higher energy bills and weaker external demand have compounded one another.

Outlook

The outlook points to slower growth, not a downturn. The IMFs 2026 downgrade is driven almost entirely by the Middle East war and higher energy prices; without the conflict, the forecast would have been raised. Inflation is expected to run higher, at about 4.4% for 2026, risking further elevation if firms and workers try to recover energy costs.

Risks sit firmly on the downside: a longer or wider conflict, deeper geopolitical fragmentation, or a re-rating of AI-driven productivity could each pull growth below the reference path. Under the IMFs severe scenario, output expands only around 2% in both 2026 and 2027, and global inflation nears 6%.2 For emerging markets, a steady easing cycle in advanced economies keeps capital flowing, while any reversal would tighten funding conditions. For emerging markets, the variable that matters most is the pace of monetary easing in advanced economies; a steady cycle keeps capital flowing toward them, while any reversal would tighten their external funding conditions.

Source

2 IMF, World Economic Outlook (April 2026)

Indian economic overview

India ended FY 2025-26 as one of the worlds fastest-growing major economies, with growth spread across manufacturing and services. The National Statistics Office, in its Second Advance Estimates, put real GDP growth at 7.6% on the revised 2022-23 base, up from 7.1% the year before, with nominal GDP rising 8.6% to _345.47 Lakh Crores3.

Two policy levers worked in the same direction through the year.

Fiscal stimulus to consumption:

The 56th GST Council replaced the four-slab structure with a simplified two-rate regime of 5% and 18%, retaining a 40% rate for luxury and sin goods, effective 22 September 2025.4 The rationalisation cut headline rates across a wide span of consumer durables, FMCG and essentials and moved individual health and life insurance to nil. Coming alongside the income tax relief in the Union Budget, it lifted disposable incomes for the salaried middle class and fed a visible pick-up in discretionary spending.

Monetary easing

The Reserve Bank of Indias Monetary Policy Committee eased the repo rate by a cumulative 125 basis points over the course of 2025, bringing the policy rate to 5.25% with the December cut,5 then held there in February 2026 as it weighed the effect of the earlier moves.6 With average CPI inflation running at 2.1% for the year, the pause reflected both unusually soft prices and firmer growth.6 These tailwinds were partly offset by the energy-cost spillover from the Middle East war. With close to half of Indias crude oil imports routed through the Strait of Hormuz, the economy is exposed to Gulf supply disruption, fuel price pass-through, and pressure on the Rupee and the current account.

Outlook

The IMF places Indias real GDP growth at 6.5% for both FY 2026-27 and FY 2027-28, a measured step down from the year just closed.7 The Reserve Bank holds a more constructive near-term view, projecting 6.9% and 7.0% growth for the first two quarters of FY 2026-27 on the strength of domestic demand and public capital expenditure.6 The medium-term case rests on familiar pillars, the demographic dividend, the governments capex push, and the steady formalisation of consumption, each of which has held up through successive external shocks. The sharpest near-term sensitivity is the path of crude oil prices and its read-through to imported inflation and the Rupee, both of which turn on how the Middle East war plays out over the year ahead.

Sources

3 National Statistics Office (MoSPI), Second Advance Estimates of National Income, FY 2025-26 (February 2026)

4 GST Council, 56th Meeting / Ministry of Finance (September 2025)

5 RBI Monetary Policy Committee (December 2025)

6 RBI Monetary Policy Committee (February 2026)

7 IMF, World Economic Outlook (April 2026)

Industry overview

Indian financial services sector

Indias financial services sector moved through FY 2025-26 on materially firmer ground than the year before, as the tighter system liquidity and unsecured retail credit stress of FY 2024-25 gave way to stabilisation. Non-food credit grew 15.9% over the year, up sharply from 10.9% in FY 2024-25, lifting aggregate outstanding credit to _212.9 Lakh Crores by March 2026, an addition of _29.2 Lakh Crores.? Retail credit, close to a third of the total, grew 16.2%, with housing demand holding steady and vehicle and gold-backed lending the standout performers.8

Key growth drivers

Digital public infrastructure

UPI processed 20.39 billion transactions in February 2026, worth _26.84 Lakh Crores at an average daily throughput of _95,865 Crores.9 Real-time settlement at this scale has stripped friction out of the system and pulled consumers and merchants further into formal financial channels.

MSME credit push

The Finance Ministry set a 19.5% growth target for MSME credit outstanding at public sector banks for FY 2025-26, taking the aggregate target to _17.31 trillion.10 A steady rise in Udyam registrations is opening fresh lending corridors for banks and NBFCs alike, most of all in the small-ticket segment.

Asset-quality reset

With the unsecured personal loan and microfinance stress of FY 2024-25 behind it, the sector entered the year with healthier balance sheets, better returns on assets and stronger capital across both banks and NBFCs, alongside a discernible tilt back toward secured lending.

Looking ahead

The sector heads into FY 2026-27 set for steadier growth as the credit cycle normalises and digital adoption reaches further into Tier 2 and Tier 3 markets. Deeper MSME formalisation, wider digital access and a settled policy backdrop point to a constructive year ahead.

Sources

8 Ministry of Finance, reported in The Tribune (May 2026)

9 IBEF, Banking in India

10 Business Standard (April 2026)

Indian NBFC sector

Non-banking financial companies have become a structurally important part of Indias credit system. Their assets under management are projected to cross _50 Lakh Crores by FY 2026-27, by when non-bank lenders are expected to hold around 18 to 19% of overall credit.11

Key growth drivers

Last-mile distribution

NBFCs reach customer segments and geographies that sit outside the operating focus of larger banks, small-ticket borrowers, self-employed households, and semi-urban and rural markets. That focus has converted into share gains, with NBFCs accounting for 41% of new personal loan disbursements by value in early 2026, against 27% two years earlier.1?

Digital underwriting on the India stack

Aadhaar authentication, electronic KYC and the Account Aggregator framework have cut onboarding costs and time across the sector. By end-December 2025, the Account Aggregator framework carried 2.61 billion financial accounts enabled for data sharing and 252.9 million users with linked accounts,1? letting NBFCs run cash-flow-based credit decisions at scale without manual document collection.

Co-lending and partnerships

Bank-NBFC co-lending matured further through the year, freeing balance sheet capacity at NBFCs while giving banks structured access to NBFC origination and servicing depth in priority-sector and small-ticket lending.

Funding-cost stability

Liquidity support from the Reserve Bank through open market operations and forex swaps, together with the rate cycle, held the wholesale funding backdrop steady for highly-rated NBFCs through the year, a direct benefit to scale lenders carrying strong credit ratings.

Looking ahead

The sector enters FY 2026-27 with its core drivers – financial inclusion, digital infrastructure and last-mile reach – intact and the cyclical pressures of FY 2024-25 largely behind it. Credit growth should track the broader sector, held up by stable funding conditions and the depth of retail demand.

Sources

11 Wright Research (January 2026)

12 Trade Brains (January 2026)

13 Sahamati / HyperVerge (April 2026)

14 Business Standard (February 2025)

15 PIB India (February 2026)

16 Reserve Bank of India, (Co-Lending Arrangements) Directions, 2025 (notification dated 6 August 2025; effective 1 January 2026)

Indian gold market

Gold held an unusually prominent place in Indian household balance sheets through FY 2025-26. Domestic prices on the MCX Commodity Exchange rose steeply over the year, reaching _139,799 per 10 grams by mid-January 2026, the rally carrying into the final quarter as war broke out in the Middle East and safe-haven demand intensified.17 The import bill told the same story from the other side: gold imports hit a record USD 71.98 billion, up 24% on FY 2024-25, even as volumes fell 4.76% to 721.03 tonnes, the rise was a price effect, not a demand surge.18 A study by HSBC Global, drawing on World Gold Council data, puts total Indian household gold holdings at roughly 25,000 tonnes, more than the combined reserves of the worlds ten largest central banks.19 Most of that stock sits outside the formal financial system, and it is the structural anchor of Indias gold loan industry. The larger the pool and the higher its value, the deeper the collateral base lenders can draw on.

Key growth drivers

Investment-led demand

Higher prices and global uncertainty pushed households to treat gold as a savings asset rather than ornament alone. Bar and coin purchases reached a record _88,680 Crores in the September 2025 quarter, with investment demand at 40% of total gold consumption, the highest share on record.20

Gold ETFs at record levels

Exchange-traded and digital gold opened the metal to retail investors, particularly in the metros. Net inflows into Indian gold ETFs reached _430 billion in 2025, the most on record, with assets under management at _1,279 billion by end-December 2025 and holdings up to 95 tonnes.17

Central bank accumulation

The Reserve Bank has steadily raised golds weight in Indias reserve mix. Holdings stood at about 880 tonnes through the year, and golds share of total foreign exchange reserves rose from 12% in March 2025 to 17% in March 2026, almost entirely on valuation gains.21

Cultural and ritual demand

The role of gold in weddings, festivals and intergenerational saving kept demand value firm even as tonnage eased with rising prices. The underlying purchase cycle held.

Sources

17 World Gold Council, India Gold Market Update (January 2026)

18 Commerce Ministry, reported via Angel One (April 2026)

19 Business Standard (March 2025)

20 IBEF (October 2025)

21 World Gold Council, Gold Demand Trends, India Focus Q1 2026

22 Outlook Money / World Gold Council report

Gold loan market

The Indian gold loan market moved into a faster phase of growth through FY 2025-26, with high gold prices, shifting retail credit patterns and a wider set of lenders all pulling the same way. ICRA expects the organised gold loan market to reach _15 trillion in FY 2025-26, a year ahead of its earlier estimate, and _18 trillion by FY 2026-27.23 NBFC gold loan assets under management are projected to grow 30 to 35% in FY 2025-26, lifted by the rising collateral value of pledged jewellery and a customer base that now extends well beyond traditional consumption borrowers.23

Key growth drivers

Rotation from unsecured to secured

As lenders pulled back on unsecured personal loans through FY 2025-26 in response to rising stress and tightened rules around unsecured lending, borrowers needing comparable sums turned to gold-backed credit as the faster, more accessible route. Personal loan growth slowed even as gold loan volumes picked up.25

Borrower accessibility

Gold loans need little documentation, waive income proof for small-ticket borrowers, and can be disbursed the same day – attributes that carry real weight in semi-urban and rural markets where formal credit access is thin.

Branch-led distribution

Specialist lenders run dense branch networks across South and Western India, backed by trained valuers and custody infrastructure. The model is demanding to build and has proved hard for digital-only entrants to replicate at speed.

Portfolio quality

Credit costs for NBFC gold loans have historically been at negligible levels, with liquid collateral and timely auction protocols containing losses.24 Secured exposure on a short tenure has kept the asset class to a structurally low-risk profile across credit cycles.

Sources

23 ICRA, reported in Business Standard (October 2025)

24 Business Standard (October 2024)

25 CNBC (March 2026)

Regulatory landscape

The Reserve Bank of Indias Directions on Lending Against Gold and Silver Collateral, notified on 6 June 2025 and effective

1 April 2026, are the most consequential reset of gold loan regulation in years.26 The framework folds what had been a patchwork of separate rules for banks, NBFCs, cooperative banks and housing finance companies into a single harmonised set and shifts the basis of regulation from the type of lender to the activity itself, bringing the whole industry to a common operating standard.

Two themes run through it. The first is greater room at the lower end of the ticket-size range: the flat 75% loan-to-value ceiling gives way to a tiered structure: 85% for loans up to _2.5 Lakhs, 80% for loans above _2.5 Lakhs and up to _5 Lakhs, and 75% for loans above _5 Lakhs, which directly benefits the small-ticket borrowers who make up the bulk of demand. The second is tighter discipline on collateral quality, valuation and assaying, disbursement, end-use and customer protection, holding established and emerging lenders to the same bar.

For specialist gold-loan NBFCs, the net effect is supportive. Crisil Ratings expects the revised norms to widen disbursement headroom for the segment, most of it in the small-ticket book that accounts for close to 70% of NBFC portfolios.27 Just as important, the new operational requirements – uniform assaying, secure custody, certified valuation, and system and reporting build-out – raise the cost of doing the business properly, which favours lenders already running that infrastructure at scale and weighs on smaller and digital-only entrants. The transition demands system, process and reporting alignment ahead of 01 April 2026, but it reinforces the standing of established specialists in a market that is turning larger and more institutionalised at once.

Looking ahead

The gold loan market enters FY 2026-27 on firm footing: high collateral values, a borrower base that increasingly treats gold-backed credit as productive capital rather than distress liquidity; and for the first time in years, a single, clear regulatory rulebook. The market-size projections for the year ahead rest on the convergence of exactly these forces. For lenders with established distribution, valuation depth and brand trust, the medium-term opportunity is among the most credible the segment has seen in a long while.

Sources

26 Reserve Bank of India, (Lending Against Gold and Silver Collateral) Directions, 2025 (notified 6 June 2025; effective 1 April 2026)

27 Crisil Ratings, reported in Business Standard (June 2025)

Company overview

Muthoot Finance Limited, the flagship of The Muthoot Group, is Indias largest gold loan NBFC. Its gold loan business dates to 1939, when it operated as Muthoot Bankers; the Company received its Reserve Bank of India licence in 2001 and is today recognised by the regulator as an Upper Layer NBFC. It provides quick, secure gold-backed credit with flexible repayment, underpinned by simple eligibility and minimal paperwork. With a 47% share of the gold loan NBFC market28 and a branch network across 29 states and union territories, the Company entered FY 2025-26 as the clear category leader.

Our services

Core business

Gold loan

Short-tenor credit secured against gold jewellery, built for quick disbursal and flexible repayment, with disciplined underwriting around ownership verification, valuation and ticket size. This single product has anchored the franchise since 1939 and makes up 95% of the overall loan book

Other services

• Personal Loans

• Business Loans

• Small Business Loans

• Loan Against Property

• Money Transfer Services

• Collection Services

28 Crisil Intelligence, Industry Report on Gold Loans (January 2026)