RBI Imposes Immediate Ban on IIFL Finance’s Gold Loan Operations

The Reserve Bank of India (RBI) has issued a decisive directive to IIFL Finance, ordering an immediate cessation of all gold loan sanctioning and disbursing activities. The stringent action comes in response to significant supervisory concerns identified in IIFL Finance’s gold loan portfolio.

The RBI’s directive prohibits IIFL Finance from approving or disbursing any new gold loans, as well as from assigning, securitizing, or selling any existing gold loans. However, the company is allowed to manage its current gold loan portfolio using standard collection and recovery procedures, as outlined in the RBI’s statement on Monday.

The regulatory intervention follows an examination of IIFL Finance’s financial position as of March 31, revealing several alarming supervisory concerns within its gold loan operations. These concerns include serious deviations in assaying and certifying the purity and net weight of gold during loan sanctioning and auction procedures following default.

Furthermore, the RBI identified breaches in Loan-to-Value (LTV) ratio standards, significant cash disbursals and collections exceeding statutory limits, non-adherence to standard auction processes, and a lack of transparency in customer account charges. Such practices not only violate regulatory standards but also jeopardize customer interests.

Despite ongoing engagements between the RBI, IIFL Finance’s senior management, and statutory auditors to address identified deficiencies, the central bank noted a lack of meaningful corrective action from the company. Consequently, the RBI deemed it necessary to impose immediate business restrictions in the interest of customer protection.

The RBI emphasized that supervisory restrictions on IIFL Finance will be subject to review upon the completion of a special audit initiated by the central bank. Additionally, the company must rectify the findings of the special audit and address the RBI’s inspection findings to the satisfaction of the regulatory authority.

Sources By Agencies

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