NEW DELHI: The Reserve Bank of India (RBI) on Monday prohibited IIFL Finance Ltd from sanctioning or disbursing gold loans with immediate effect after it found the non-banking financial corporation (NBFC) not adhering to standard procedures laid down by the regulator.
The regulator has also barred IIFL Finance from assigning, securitising or selling any of its gold loans. The company can, however, continue to service its existing gold loan portfolio through usual collection and recovery processes.
RBI in a statement said that it found certain material supervisory concerns after it carried out an inspection of the company with reference to its financial position as on March 31, 2023. The RBI found serious laxity and deviations in assaying and certifying purity and net weight of the gold at the time of sanction of loans and at the time of auction upon default. The NBFC was also found breaching Loan-to-Value norms, disbursing and collecting a significant amount of loan in cash (far in excess of the statutory limit).
The banking regulator also found that the NBFC was not adhering to the standard auction process, and was not transparent in charges being levied to customer accounts, etc.
These supervisory restrictions will be reviewed upon completion of a special audit to be instituted by the RBI and after rectification by the company of the special audit findings and the findings of RBI Inspection, to the satisfaction of RBI.
Gold loans account for one-third of IIFL Finance’s total loan portfolio of Rs 77,444 crore at the end of December 31, 2023. The company’s gold loan portfolio has surged 4 times since 31 March 2019 to Rs 24,700 crore by 31 December 2024. IIFL Finance’s share price fell 4% on Monday to end at Rs 598.
Gold loans account for one-third of IIFL Finance’s total loan portfolio of Rs 77,444 crore at the end of December 2023.
Found certain material supervisory concerns: RBI
RBI has barred IIFL Finance from assigning, securitising or selling any of its gold loans. The company can, however, continue to service its existing gold loan portfolio via usual collection and recovery processes. RBI said it found certain material supervisory concerns after it carried out an inspection of the company with reference to its financial position