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Muthoot Finance Ltd. and Manappuram Finance Ltd. witnessed a sharp decline in their standalone returns (2.2%-4.6%) and equity returns (4.2%-10%) in FY22 compared to FY21 due to the introduction of teaser ( lower) rate schedules.
While such plans have since been shelved, an overview of their history tells us that this wasn’t the first time players resorted to such a strategy to attract customers.
Muthoot Finance had offered teaser rate schedules in FY15/FY16. But both then and in FY22, results were sub-optimal as there was no significant volume growth to offset the decline in revenue.
However, between these two periods there were important differences in the rationale of the number of teasers and the method of implementation.
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