
The Reserve Bank of India (RBI) on Monday has taken decisive action against IIFL Finance, directing the company to cease all activities related to sanctioning or disbursing gold loans, as well as the assignment, securitisation, or sale of any existing gold loans. This directive, effective immediately, comes as the RBI conducted an inspection of IIFL Finance’s financial position as of March 31, 2023, revealing several significant supervisory concerns within the company’s gold loan portfolio.
As of Q3FY24, gold loans form 31.9% of the company’s total Assets Under Management (AUM).
The inspection uncovered troubling deviations in the assaying and certification process of gold purity and net weight, both during loan sanctioning and auction proceedings in the event of defaults. Additionally, breaches in Loan-to-Value ratio, excessive cash disbursals and collections surpassing statutory limits, non-compliance with standard auction protocols, and lack of transparency in customer account charges were identified as key areas of concern.
These findings highlight regulatory apprehensions regarding the integrity and compliance of IIFL Finance’s gold loan operations. As the company grapples with these challenges, stakeholders and market observers are closely monitoring developments in response to the RBI’s directive.
The RBI’s intervention underscores the critical importance of adhering to regulatory standards to maintain the stability and trustworthiness of financial institutions. Going forward, robust oversight and adherence to compliance measures will be imperative to safeguarding the integrity of the financial system.