RBI Bars IIFL Finance from Sanctioning Gold Loans Over Supervisory Concerns

The Reserve Bank of India (RBI) has imposed an immediate ban on IIFL Finance, preventing the company from sanctioning or disbursing gold loans. This action follows the identification of significant supervisory concerns related to IIFL Finance’s gold loan portfolio. The company is permitted to continue servicing its existing gold loan portfolio through regular collection and recovery processes.

According to the RBI’s statement, an inspection of IIFL Finance was conducted concerning its financial position as of March 31, 2023. The inspection revealed material supervisory concerns in the gold loan portfolio, including serious deviations in assaying and certifying the purity and net weight of gold during loan sanction and auction processes in case of default.

The regulatory violations and deviations from best practices were noted to adversely impact the interests of customers. The RBI has directed IIFL Finance to cease and desist from sanctioning or disbursing gold loans, as well as from assigning, securitizing, or selling any of its existing gold loans.

The supervisory restrictions imposed on IIFL Finance will be subject to review after the completion of a special audit initiated by the RBI. The review will consider the rectification of findings from the special audit and the RBI inspection to the satisfaction of the central bank.

The business restriction imposed by the RBI is specified as a precautionary measure and does not preclude additional regulatory or supervisory actions that may be initiated against IIFL Finance. The central bank aims to ensure compliance, rectification of concerns, and safeguarding the interests of customers in the gold loan segment.

Key Points:
– The RBI has barred IIFL Finance from sanctioning or disbursing gold loans due to observed supervisory concerns in its gold loan portfolio.
– IIFL Finance is allowed to continue servicing its existing gold loan portfolio through regular collection and recovery processes.
– Material supervisory concerns include serious deviations in assaying and certifying gold purity and net weight during loan processes and auctions in case of default.
– The supervisory restrictions will be subject to review after a special audit is conducted, and the company rectifies findings to the satisfaction of the RBI.
– The business restriction does not prevent additional regulatory or supervisory actions that may be initiated by the RBI against IIFL Finance.