The Aryavarth Express
Agency(BENGALURU):The Reserve Bank of India (RBI) has initiated a special audit of IIFL Finance, approximately one and a half months after imposing a ban on the non-bank finance company’s gold loan operations. This move comes in the wake of “material supervisory concerns” regarding the company’s gold loan portfolio, which had previously constituted nearly one-third of its total loan assets at the end of 2023.
The RBI’s action in early March to halt the sanctioning, disbursing, and selling of gold loans led to significant liquidity worries among investors and lenders of IIFL Finance, contributing to a nearly 30% drop in its market value since the order was issued.
IIFL Finance has expressed its commitment to fully cooperate with the RBI-appointed audit team to ensure a comprehensive evaluation of its practices. “We are committed to extending full cooperation to the special audit team to ensure a comprehensive and thorough audit,” the company stated on Tuesday.
In response to the financial strain brought on by the RBI’s restrictions, IIFL has secured liquidity support from its principal shareholder, Fairfax India, and has announced plans to raise additional funds to mitigate investor and lender concerns.
The outcomes of this audit are highly anticipated, as they will determine the future of the RBI’s restrictions on IIFL’s gold loan operations. The RBI has stated that the limitations will be reevaluated following the audit’s completion and the company’s rectification of any issues found. This situation highlights the ongoing regulatory scrutiny in India’s financial sector, particularly concerning non-bank financial companies (NBFCs).