Following its recent regulatory measures against Paytm Payments Bank Limited ( PPBL ), the Reserve Bank of India ( RBI ) has taken further action, this time targeting India Infoline Finance Limited (IIFL Finance). The apex bank has barred IIFL Finance from granting gold loans and engaging in related sales activities.
In exercising its authority under Section 45L(1)(b) of the Reserve Bank of India Act, 1934, the RBI has directed IIFL Finance Ltd. to immediately halt all processes associated with sanctioning or disbursing gold loans, as well as any actions involving the assignment, securitization, or sale of existing gold loans. However, the company remains permitted to continue servicing its current gold loan portfolio through standard collection and recovery procedures.
The RBI’s decision followed a thorough inspection of IIFL Finance, with particular focus on its financial standing as of March 31, 2023. During this review, significant concerns emerged regarding the management of the company’s gold loan portfolio.
These included notable irregularities such as discrepancies in gold purity and net weight assessment during loan approval and default auctions, breaches in Loan-to-Value ratios, excessive cash transactions beyond statutory limits, deviations from standard auction procedures, and opaque fee structures impacting customer interests.
Despite ongoing engagement between the RBI, IIFL Finance’s senior management, and statutory auditors to address these deficiencies, no substantial corrective actions have been taken to date. Consequently, the RBI deemed it necessary to impose immediate business restrictions to safeguard customer interests.
These supervisory restrictions will remain in place pending the completion of a special audit initiated by the RBI, along with the rectification of audit findings and inspection results by IIFL Finance to the satisfaction of the RBI.
There has been a 3.94% decrease in the stocks of IIFL Finance Limited in the National Stock Exchange ( NSE ).
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