NEW DELHI: The Reserve Bank on Monday barred IIFL Finance with immediate effect from sanctioning or disbursing gold loans after certain material supervisory concerns were observed in its gold loan portfolio. The company is also barred from assigning, securitizing, or selling any of its existing gold loans. IIFL Finance can, however, continue to service its existing gold loan portfolio through the usual collection and recovery processes, the RBI said in a statement.
“The RBI has today…directed IIFL Finance Ltd to cease and desist, with immediate effect, from sanctioning or disbursing gold loans or assigning/ securitising/ selling any of its gold loans,” a press release said.
The directive follows an inspection conducted by the RBI, focusing on IIFL Finance Ltd.’s financial position as of March 31, 2023. The inspection raised substantial supervisory concerns related to the company’s gold loan portfolio.
“Certain material supervisory concerns were observed in the gold loan portfolio of the company, including serious deviations in assaying and certifying purity and net weight of the gold at the time of sanction of loans and at the time of auction upon default…,” it noted.
Key issues include deviations in the assaying and certifying of gold purity and net weight during loan sanction and auction processes, breaches in Loan-to-Value ratio, excessive cash disbursal and collection exceeding statutory limits, non-compliance with standard auction procedures, and lack of transparency in charges levied to customer accounts.
These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers, the central bank added.
The release further said the supervisory restrictions will be reviewed upon completion of a special audit to be instituted by the RBI and after rectification by the company of the special audit findings and the findings of RBI inspection to the satisfaction of the central bank.
“The RBI has today…directed IIFL Finance Ltd to cease and desist, with immediate effect, from sanctioning or disbursing gold loans or assigning/ securitising/ selling any of its gold loans,” a press release said.
The directive follows an inspection conducted by the RBI, focusing on IIFL Finance Ltd.’s financial position as of March 31, 2023. The inspection raised substantial supervisory concerns related to the company’s gold loan portfolio.
“Certain material supervisory concerns were observed in the gold loan portfolio of the company, including serious deviations in assaying and certifying purity and net weight of the gold at the time of sanction of loans and at the time of auction upon default…,” it noted.
Key issues include deviations in the assaying and certifying of gold purity and net weight during loan sanction and auction processes, breaches in Loan-to-Value ratio, excessive cash disbursal and collection exceeding statutory limits, non-compliance with standard auction procedures, and lack of transparency in charges levied to customer accounts.
These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers, the central bank added.
The release further said the supervisory restrictions will be reviewed upon completion of a special audit to be instituted by the RBI and after rectification by the company of the special audit findings and the findings of RBI inspection to the satisfaction of the central bank.