Following the Reserve Bank's concern over 'concentration risk', gold loan major Manappuram Finance today said it will be diversifying into lending for small businesses and housing finance.

"The regulator wants us to diversify and there are synergies which we can tap," the company's managing director and chief executive V P Nandakumar told reporters here.
He said lending to small businesses will start in the next three months, but refused to give a timeline for the housing business, saying that the company has for now decided only to enter the highly competitive fray.

Loans to the small businesses will be done in a secured way, that is against some underlying asset, he said, adding that the company will have a separate subsidiary for the housing finance business to take advantage of provisions like availing refinance from the National Housing Bank.

When asked about the route to be adopted for the entry into housing finance, and whether it will be acquiring an existing business, Nandakumar declined to comment.
The company's deputy chief executive and executive director I Unnikrishnan said 80 per cent of its borrowers own small businesses and hence getting into the fray for lending to small businesses makes a good business case.

Notably, sector regulator Reserve Bank of India had shown concerns about the 'concentration risk' for companies like Manappuram who finance against gold following the volatility in the gold prices.

Steps taken by the RBI include a reduction in the loan to value (LTV) ratio, or the maximum permissible limit of lending up to 60 per cent, which resulted in massive reductions in asset growth for such companies.

Meanwhile, Manappuram today announced it will be raising up to Rs 200 crore through a non-convertible debenture issue, which will be open between December 30 and January 20.