RBI bars IIFL Finance from disbursing gold loans
Gold loans constitute 32% or Rs 20,733 crore of IIFL Finance's total assets under management as of March 31, 2023, according to the finance company's annual report.
The has banned the stock exchange listed from sanctioning and disbursing new immediately, according to a statement issued by the regulator on Monday.In a strongly worded statement, the has said that to 'cease and desist with immediate effect from sanctioning and disbursing gold loans or assigning or securitising or selling any of its gold loans.'
Gold loans constitute 32% or Rs 20,733 crore of IIFL Finance's total assets under management as of March 31, 2023, according to the finance company's annual report.
The RBI said that the decision was taken following an inspection of the company undertaking by them for the year ending March 31, 2023. The regulator said that 'certain material supervisory concerns were observed in the gold loan portfolio of the company, including 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.'
The company can continue to service its existing gold loan portfolio through the collection and recovery process.
The RBI noted that these violations significantly and adversely impact customers' interest.
Justifying the rationale for the action, the RBI stated over the last few months that it has been engaging with the company's senior management and statutory auditors 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.'
IIFL Finance's gold loan book rose 28% on a year-on-year basis, and its average ticket size was Rs 60000 in FY22-23, per the annual report.
The RBI said that the decision was taken following an inspection of the company undertaking by them for the year ending March 31, 2023. The regulator said that 'certain material supervisory concerns were observed in the gold loan portfolio of the company, including 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.'
The company can continue to service its existing gold loan portfolio through the collection and recovery process.
The RBI noted that these violations significantly and adversely impact customers' interest.
Justifying the rationale for the action, the RBI stated over the last few months that it has been engaging with the company's senior management and statutory auditors 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.'
IIFL Finance's gold loan book rose 28% on a year-on-year basis, and its average ticket size was Rs 60000 in FY22-23, per the annual report.
