The Aryavarth Express
Agency(New Delhi): In a significant regulatory move, the Reserve Bank of India (RBI) on Monday mandated IIFL Finance Ltd. to cease sanctioning or disbursing gold loans with immediate effect. The directive comes in light of serious supervisory concerns identified during the RBI’s inspection of the company’s financial position, particularly within its gold loan portfolio.
The concerns highlighted by the RBI include severe deviations in the assaying and certification of gold’s purity and net weight at both the loan sanctioning and auction stages upon default. Additionally, the inspection revealed violations concerning the loan-to-value ratio, notable instances of disbursing and collecting loan amounts in cash beyond statutory limits, non-compliance with standard auction processes, and opacity in the charges levied on customer accounts.
While IIFL Finance is barred from sanctioning new gold loans or engaging in activities related to the assignment, securitization, or sale of its gold loan assets, the company is permitted to continue managing its existing gold loan portfolio, including collections and recovery processes.
The RBI’s decision to impose these business restrictions follows a period of engagement with IIFL Finance’s senior management and statutory auditors to address these deficiencies. However, the absence of meaningful corrective actions from the company’s end prompted the RBI to take immediate steps in safeguarding customer interests.
These supervisory restrictions will be subject to review following a special audit initiated by the RBI. The central bank will consider lifting the restrictions based on the company’s rectification of the audit findings and RBI inspection outcomes to the regulator’s satisfaction.
This measure, as clarified by the RBI, does not preclude the possibility of further regulatory or supervisory actions that may be undertaken against IIFL Finance, underscoring the seriousness with which the central bank views the identified issues and its commitment to ensuring the integrity of financial operations and the protection of customer interests.