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Loan Policy
Loan Policy
1. The Company may grant both secured and unsecured loans to individuals, Companies, firms, trusts and other entities as per the emerging business needs.
In case the loans are given without any primary/collateral security, like unsecured personal loans and other clean loans, more than ordinary care will be taken to see that such loans are granted only to persons/firms/Companies of repute with credit worthiness and track record. Any lending other than against the pledge of gold jewellery as collateral security will be subject to the maximum exposure limit of 15% of the net owned funds of Muthoot Finance Ltd. The rate of interest will be decided on a case to case basis taking into account various factors like the cost of funds, operational expenses, risk attached to the advance etc but will be subject to the ceiling on the maximum interest rate chargeable as per the Fair Practices Code of the Company.
2.The Company may outsource some of the activities connected with such loans like sourcing of loan applications/KYC verification/ dues collection etc. In such cases, agencies will be empanelled only after they are subjected to a due diligence process and after entering into an agreement with them complying with the conditions stipulated in the Board approved Outsourcing Policy.
The outsourcing agencies will be subjected to regular review and periodical audits by the Company’s internal auditors to ensure that they are complying with the mandatory requirements under Labour laws and other applicable regulations and the terms and conditions of the agreement entered into with the Company are being followed
3.The Company may also grant secured and unsecured loans to its employees and employees of its group companies in accordance with their eligibility and other terms and conditions fixed from time to time.
- Product: To provide secured/unsecured loans to individuals for meeting any financial need/purposes
- Eligible customer: Personal loans will be extended mainly to salaried employees of Public Sector units, other reputed institutions and self-employed individuals. All other individuals who are willing to provide 100% collateral security in the form of NSCs, RBI bonds, LIC policies, or any other tangible security will also be eligible to avail personal loans.
- Purpose: The loan will be granted for meeting any personal purposes including consumption needs.
While personal guarantee of another person may not be insisted upon in the case of fully secured loans at the discretion of the sanctioning authority, guarantee of a third party drawing the same or higher salary and having the same or higher take home pay or any other person acceptable to the Company may be insisted in the case of unsecured personal loans granted to salaried individuals.
Loans will be granted to individuals only after the Company is satisfied about the credit worthiness, integrity, local standing and repayment capacity of each borrower.
As a general rule unsecured personal loan will not be granted to any person who does not have regular verifiable income. - Nomenclature and tenure of the loan:The loan will be sanctioned as a Demand Loan, repayable on demand, for a maximum tenure of 60 months. The Company may, at the request of the borrower, allow repayment in convenient instalments or equated monthly instalments.
- Quantum of finance:The quantum of finance will be decided mainly on the basis of the borrowers’ repaying capacity and the value of security provided.
- Interest and charges including penal interest:Interest rates will be fixed on the basis of risk assessment, cost of funds, cost of operations etc and may differ for different schemes and different categories of borrowers. Processing charges as decided from time to time will be recovered.
- Documentation:Salary certificate for salaried persons and IT returns for the last 3 years for others and any other additional documents as per the decisions of sanctioning authority will be insisted upon.
Demand Promissory Note/Agreement, ACH mandate, undertaking from borrowers for deducting instalments from salary.
Ceiling on net take home pay will be fixed in the case of salaried people to ensure prompt repayment.
The Company will be free to modify the terms and conditions of the loan scheme anytime without giving any notice, which will be made applicable prospectively. The Company may stipulate fulfillment of certain minimum criteria like age, net salary, total years of service, years of service left, owning a house etc depending upon the risk profile of the person and will have the right to reject any application for nonfulfillment of any of the criteria or without assigning any reason.
Providing Pre-Approved Top –Up Loan to existing customers: With a view to retaining existing personal loan customers a pre- approved top up loan facility can be made available. Existing customers with excellent track record of repayment can be offered pre-approved top up loans as per their eligibility. This will help to build an incremental portfolio growth. Track record of minimum 12 months or a lesser period EMI payment as found suitable may be used as a yardstick to offer such loans to existing borrowers. The top up loan shall be as a percentage of the original loan depending upon the period of track record of prompt EMI repayment reckoned and as decided by the management. Facility of data scrub as mentioned below also can be used to identify track record of repayment of loans from other lending institutions. Such top-up loans can be granted to eligible existing customers in the salaried and other segments
Review and Renewal of Gold Loans:
Gold Loan portfolio have to be reviewed periodically and variation in the value of pledged security according to the prevailing market price of gold vis-à-vis the outstanding liability shall be assessed. During a falling gold price scenario renewals can be permitted at the current LTV with remittance of the interest/ principal due if any or without any inflow of interest/ principal subject to pledge of additional gold to cover the renewal at current LTV.
During an increasing Gold price scenario, the customers will be eligible for higher loan amount and customers may seek for renewal of the loan at the current LTV to avail additional loan on existing pledge. Though no specific additional risk is involved in such renewals at current LTV, such renewals without cash inflow for interest needs to be monitored separately to mitigate the risk in the event of a future fall in gold price. Such renewals shall be done under a special scheme and a suitable threshold limit for such renewals also shall be fixed as a risk mitigation strategy. Gold loan portfolio under the special scheme should always be within 40% of the total Gold loan portfolio of the Company.
Personal Loans to individuals other than salaried persons:
Considering the opportunities available for lending to the above segment, instruments available to measure and mitigate risks, lending to non – salaried segment also can be made. CIBIL score and data scrub on our existing customers by reputed credit information agencies like CRIF High Marks may be used to identify potential customers in this segment with excellent track record and very low / low credit risk profile. Prospective customers identified by Fintech companies through their digital marketing platform can also be considered for financing subject to fulfillment of the eligibility criteria stipulated by the Company for granting unsecured loans
Personal Loans to Employees: Employees of Muthoot Finance and all other Divisions of the Muthoot Group with a minimum service of 5 years can be granted loans for meeting personal needs. Such loans can be granted at a rate of interest of 15% p.a. and repayable within a maximum period of 24 months. The maximum limit for such loans will be Rs.1 lakh for Supervisory staff and Rs.50, 000/- for Non-Supervisory staff. Modification to terms and conditions can be approved by a Committee constituted by Board.
Loans to Landlords:Unsecured loan up to 60 times the net monthly rent payable can be granted to owners of premises occupied by our branches / offices. In the case of branches, the Gold Loan outstanding should not be less than Rs.3 crores. The loan is to be repaid in EMIs within a maximum period of 84 months from the monthly rent payable. The remaining lease period should be more than the repayment period of the loan. The minimum rate of interest will be 16% p.a. and maximum 17% p.a. Service Charges @1% of the loan also to be collected. Modification to terms and conditions can be approved by a Committee constituted by Board.
Loans to SME segment: The Company may extend financial assistance to SME segment directly or through arrangements with other financial entities like FINTECH Companies for co-lending. The loans can be granted either in the form of Working Capital or Term Loan. Any scheme for lending to this segment will need the prior approval of the Managing Director.
Loan to Traders and Self- Employed Many of our customers availing gold loans belong to traders and self – employed category. With a view to attract such customers and to retain them with us, loans can be granted to them based on their income earning and repayment capacity duly backed by a good credit history as revealed by their CIBIL Reports. New customers not having relationship with us may also be considered. The loan will be unsecured. Spouse will be a co-obligant for such loans. If no spouse, co-obligancy by a suitable close relative like father, brother etc. to be insisted upon.
Salient features of the scheme are given below.
Eligible customers
Wholesale and retail traders, Self-employed professionals like allopathic doctors, chartered accountants, company secretaries and architects.
Purpose
For any genuine business purpose (Working capital requirements, acquisition /repair/ renovation of fixed assets/ equipments / machinery etc). Loans for personal purpose will not be granted under the scheme.
Quantum of finance
As decided by management from time to time. Initially minimum loan amount may be Rs 50,000 and maximum Rs 1L.
Documents Required
Any officially valid documents for completing KYC as given below. Identity proof: Passport / Voters ID card/ Driving License/PAN Card/Aadhar Card Address Proof: Passport / Voters ID card/ Driving License/PAN Card/Aadhar Card Ration card Tel/ Electricity Bill/ Lease agreement.
Repayment
By way of monthly EMI. EMI can be paid through ACH mandate and credited to a dedicated account. Other modes of repayment also can be made.
Interest and charges including penal interest
Interest rates will be fixed on the basis of risk assessment, cost of funds, cost of operations etc and may differ for different schemes and different categories of borrowers. Processing charges as decided from time to time will be recovered.
Period of Loan
Minimum three months and maximum 24 months
Documentation:
- 1. Application form
- 2. Loan Agreement
- 3. DPN
- 4. DP Note Delivery Letter
- 5.Postdated cheque Acknowledgement letter
- 6. Request for disbursal of loan amount
- 7. ACH mandate
Sourcing and Recovery:
Sourcing and recovery shall be by MFIN branches. If found necessary services of outside agencies can be availed.
Asset Classification and income recognition:
Asset classification and income recognition in case of all loans sanctioned under the various schemes formulated to cater to different segments, will be as per the norms prescribed by Reserve Bank of India from time to time.
Ancillary Business: The Company may, with a view to augmenting its non-fund based income, enter into arrangements with any Company or entity for selling Insurance, Mutual fund or any other products, strictly within the norms prescribed by the regulators in the respective area and those stipulated by Reserve Bank of India from time to time.
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