RBI Bans IIFL from Disbursing New Gold Loans Citing Supervisory Concerns

“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," it said.

The RBI said that an inspection of IIFL was carried out with reference to its financial position as on March 31, 2023. During the inspection, certain material supervisory concerns were observed in the gold loan portfolio of IIFL 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 listed company was also breaching the norms in Loan-to-Value ratio; 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.

“These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers. 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. This has necessitated the imposition of business restrictions with immediate effect, in the overall interest of customers.”