Gold loan simply means taking a loan against gold. This is a secured loan, in which items like gold jewellery, bullion are pledged to a bank or NBFC for a loan. This loan is given to the borrower against this gold. That is why the shares of Manappuram Finance Ltd and Muthoot Finance have risen sharply.

Muthoot Finance Ltd- The stock opened at Rs 2,014.45 on Wednesday morning against the closing price of Rs 1,991.00. After this, the stock gained momentum and it crossed 2,040. The stock is very close to its new peak. The all-time high of the stock is Rs 2,078.75.

(Gold Price: These are the 5 reasons due to which the price of gold is not stopping, know when it will become cheaper now) Manappuram Finance Ltd- The stock opened at Rs 206 on Wednesday against the closing price of Rs 204.68. After this, the stock declined. But again now (10:50am) it is trading with a rise. How will companies benefit from the rising prices of gold- Gold financiers like Muthoot Finance and Manappuram Finance are institutions that give loans in exchange of gold.

For Manappuram Finance, the gold loan portfolio is 2/3 of the total business, while for Muthoot Finance, the entire portfolio consists of gold loans.

With the increase in gold prices, the number of people taking gold against gold usually increases.

This means that the ticket size of the loan increases. In simple words, companies have an opportunity to increase revenue. Also, the price of the gold pledged also increases.

If a customer has less gold but wants a bigger loan, then as per RBI guidelines, he will get the loan only under the fixed LTV i.e. loan to value. But he gets the benefit of the rise in gold prices.

The rise in gold prices can also have a positive impact on the profits of gold financiers. This is because the interest rates charged on gold loans are generally higher than the interest rates charged on other types of loans. This means that with the increase in loan growth, the profits of gold financiers can also increase.