The Reserve Bank of India on Monday crackdowns on the IIFL Finance Ltd. banning the sanctioning or disbursing of gold loans by the financier with immediate effect.
It directed the company to cease and desist, with immediate effect, from sanctioning or disbursing gold loans or assigning/ securitising/ selling any of its gold loans.
However, the company continue to service its existing gold loan portfolio through usual collection and recovery processes.
RBI’s move is in exercise of its powers under Section 45L(1)(b) of the Reserve Bank of India Act, 1934.
Why RBI bans IIFL Finance from gold loan?
According to the statement released by the central bank, an inspection of the company was carried out with reference to its financial position as on March 31, 2023.
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, RBI 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. This has necessitated the imposition of business restrictions with immediate effect, in the overall interest of customers.
(This is a developing story)