homebusiness Newscompanies NewsRBI orders IIFL Finance to stop disbursing gold loans after finding serious deviations, breaches
RBI orders IIFL Finance to stop disbursing gold loans after finding serious deviations, breaches
The Reserve Bank of India observed some material supervisory concerns 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. The central bank had carried out an inspection of the company with reference to its financial position as on March 31, 2023.
The Reserve Bank of India (RBI) on Monday, March 4, directed IIFL Finance Ltd to cease and desist from sanctioning or disbursing gold loans, and assigning or securitising or selling any of its gold loans. However, the company can continue to service its existing gold loan portfolio through the usual collection and recovery processes.
The central bank said it carried out an inspection of the company with reference to its financial position as on March 31, 2023.
It observed some material supervisory concerns in the gold loan portfolio of IIFL Finance, 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. The central bank also found breaches in loan-to-value ratio, and significant disbursal and collection 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 being levied to customer accounts, etc are the other major concerns raised by the central bank.
The RBI pointed out that these practices are also significantly and adversely impacting the interest of the customers in addition to being regulatory violations. The central bank said, “Over the last few months, the RBI has been engaging with the senior management and the statutory auditors of the company on these deficiencies; however, no meaningful corrective action has been evidenced so far.”
In the overall interest of customers, RBI necessitated the imposition of business restrictions on IIFL Finance with immediate effect.
The supervisory restrictions on IIFL Finance will be reviewed on completion of a special audit to be instituted by the central bank, and after rectification by the company of the special audit findings and the findings of the RBI inspection, to the satisfaction of the central bank.
In response, IIFL says, "We re-affirm our commitment to rectify observations of the RBI in gold loan portfolio to comply with RBI findings at the earliest and will continue with our endeavor to provide gold loan services in the overall interest of customers."
(Edited by : Shoma Bhattacharjee)
First Published: Mar 4, 2024 6:27 PM IST
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