2024-03-05 17:48:03
Mumbai: The Reserve Bank on Monday stopped IIFL Finance from distributing gold loans with immediate effect. The regulator has taken this action after serious flaws were found in the testing and verification of the purity of gold. This instruction of the Reserve Bank of India (RBI) is related only to the gold loan business of the company. IIFL Finance, a leading financial services provider, offers a wide range of loans and mortgages. RBI said in a statement that this step has been taken after some concerns came to light in lending against gold during regulatory supervision. However, IIFL Finance can continue to maintain its existing gold loan portfolio through collection and recovery process of existing loans.
What has RBI said?
According to the statement, ‘RBI has approved IIFL Finance Ltd. has been directed to stop sanctioning or disbursing gold loans or securitization or sale of any of its gold loans with immediate effect. RBI said the company was inspected with reference to the financial position of IIFL as on March 31, 2023.
The central bank said, ‘Some significant concerns were seen in the gold loan business of the company. These include serious lapses in testing and certification of purity and net weight of gold at the time of loan sanction and at the time of default auction. Apart from this, irregularities in distribution and collection of loan amount in cash in excess of the statutory limit and non-compliance with the standard auction process were also found.
Steps taken after not seeing improvement
The central bank said it had been discussing these lapses with the company’s senior management and auditors over the past few months but no ‘meaningful corrective action’ has emerged. In this situation, it has become necessary to impose trade restrictions with immediate effect in the overall interest of the customers. The central bank said that apart from being regulatory violations, these activities also affect the interests of customers.
According to the statement, these restrictions will be reviewed upon completion of a special audit by RBI and the company’s satisfactory satisfaction of the special audit findings and RBI inspection facts.
IIFL Finance is one of the leading companies in the financial services sector. It provides a variety of loan services through its subsidiaries – IIFL Home Finance, IIFL Samast Finance Limited and IIFL Open Fintech. It has more than 2,600 branches in more than 500 cities.