 "IIFL Finance slumps 20% post RBI ban on sanctioning, disbursing gold loans")
Shares of IIFL Finance slumped 20 per cent to the lower circuit on BSE at Rs 479 in Tuesday's intra-day trade after the Reserve Bank of India (RBI) barred the NBFC from sanctioning or disbursing gold loans or assigning/ securitising/ selling any of its gold loans.
The regulator has, however, allowed IIFL to service its existing gold loan portfolio through the usual collection and recovery processes.
A combined 196,914 equity shares changed hands and there were pending sell orders for 20.08 million shares on the NSE and BSE, as of 9:45 am.
Following an inspection of IIFL Finance with reference to its financial position as on March 31, 2023, the RBI observed deviations in assaying and certifying purity and net weight of the gold at the time of sanctioning loans and at the time of auction upon default.
The regulator also found breaches in the loan-to-value ratio, significant disbursements and collections of loan amount in cash far in excess of the statutory limit, non-adherence to the standard auction process, and lack of transparency in charges on customers.
IIFL Finance, in an exchange filing, said the company is committed to rectify RBI observations in its gold loan portfolio to comply with the findings at the earliest. CLICK HERE FOR FULL DETAILS
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Motilal Oswal Financial Services believes this is a major negative setback for IIFL as gold loans constitute 32 per cent of its asset under management (AUM) mix and a large proportion of co-lending done by the company was in the gold loan segment.
Since these are process-related lapses, the company can work with the regulator to rectify its observations in the gold loan portfolio, it believes.
Since these are process-related lapses, the company can work with the regulator to rectify its observations in the gold loan portfolio, it believes.
“Given that there is little clarity on the duration for which this ban could remain in effect, it is difficult to quantify the impact of this ban on IIFL’s AUM growth and profitability. We may look to revise our estimates after the conference call hosted by the IIFL management on March 5, 2024,” the brokerage said in a company update.
Meanwhile, shares of IIFL Securities slipped 9 per cent to Rs 139 on the BSE in intra-day trade. In comparison, the S&P BSE Sensex was down 0.18 per cent at 73,340.