MFs say investments won't be hit by gold loan ban against ETFs
Mumbai: RBI's decision to ban banks and NBFCs (Non-bank financial companies) from extending loans against gold exchange-traded funds and gold mutual funds will not have any material impact on these investments, industry players have said.
"Leveraging gold ETFs to buy other asset class or more gold is not a distinct phenomena here. Most of the investors invest in gold ETF kind of products for portfolio diversification," IDBI Mutual Fund chief executive Debasish Mallick told the agency here today.
Yesterday, the Reserve Bank had asked banks and NBFCs not to extend loans against units of gold exchange traded funds (ETFs) and gold mutual funds in a bid to contain bullion imports, which is one of the major factors behind the high current account deficit which is estimated to cross 5 percent of GDP in 2012-13 fiscal.
Mallick also said that when the outlook seemed to be bearish on the gold prices front, investors would be less inclined to get loans against their ETF holdings.
Assets under management (AUM) in the gold ETF segment stood at Rs 11,648 crore by the end of March quarter.
While holding of companies stood at Rs 6,345 crore, retail investors were second with a holding of Rs 3,124 crore in the gold ETF category with rest coming from banks, foreign institutional investors and wealthy individuals.
Referring to this issue, a top official from Quantum Mutual Fund said leveraging through ETF was very less in domestic market.
"Unlike developed economies, leveraging of gold ETF units is very small. So, I don't think, investors would shy away from investing in this segment due to the RBI decision," Quantum Mutual Fund chief executive Jimmy A Patel said.
Patel also said that despite the fall in gold prices, there is no significant outflows.
Gold price is hovering around Rs 26,000 per 10 grams now from the peak of around Rs 32,000, prompting many investors globally to liquidate their gold ETF holdings.
Meanwhile, another fund manager from a mid-size fund house said that though RBI's decision would not have major impact on retail investors, some institutional investors might get impacted due to this step.