IIFL Finance tanks after RBI restricts gold loan operations

IIFL Finance hit a lower limit of 20% to Rs 478.50 after RBI barred the company from sanctioning, disbursing new gold loans, citing "material supervisory concerns".

The Reserve Bank of India (RBI) has imposed a business restriction on IIFL Finance, effective 4 March 2024. This restriction prohibits IIFL Finance from issuing new gold loans or selling existing ones. The action stems from concerns identified during a recent RBI inspection of IIFL's gold loan portfolio.

The inspection revealed deviations from standard procedures for gold valuation, breaches of loan-to-value ratio limits, excessive cash transactions, and a lack of transparency in customer fees. These practices constitute violations of regulations and could potentially harm customers.

The RBI has been in communication with IIFL Finance for several months in an attempt to address these concerns. However, due to a lack of corrective action, the RBI implemented this restriction to protect customer interests.

IIFL Finance can continue to manage its existing gold loan portfolio, including collecting payments. An independent audit will be conducted to further investigate the specific issues. IIFL Finance must address the findings of both the RBI inspection and the upcoming audit to the satisfaction of the RBI before resuming gold loan operations.

"The financial impact quantifiable in monitory terms cannot be ascertained at this point of time," the company said.

This business restriction is independent of any other potential regulatory or supervisory actions the RBI may take against IIFL Finance.

IIFL Finance, a leading retail-focused NBFC in India, offers loans and mortgages through its subsidiaries. With a wide range of products and a vast customer base, they operate across India through branches and digital channels.

For the quarter ended 31 December 2023, IIFL Finance reported net profit after tax of Rs 545 crore (before non-controlling interest) up 29% y-o-y. Total income (net) grew 28% y-o-y to Rs 1,687.5 crore.

Powered by Capital Market - Live News