Reserve Bank bars IIFL Finance from sanctioning new gold loans

Photo Courtesy: Twitter/@GOLDCOUNCIL

New Delhi [India], March 4 (ANI): The Reserve Bank of India has directed IIFL Finance Ltd. (the company) to stop sanctioning or disbursing gold loans or assigning, securitising, or selling any of its gold loans.

This RBI order comes into effect immediately.

The company can, however, continue to service its existing gold loan portfolio through usual collection and recovery processes, the central bank said in its order on Monday.

Explaining the rationale behind this move, RBI said 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; breaches 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,” the central bank said.

An inspection of the company was carried out by the Reserve Bank of India concerning its financial position as of March 31, 2023.

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, a release said.

This, RBI said, has necessitated the imposition of business restrictions with immediate effect, in the overall interest of customers.

These 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 RBI. (ANI)

Provided by SyndiGate Media Inc. (Syndigate.info).