RBI Imposes Business Restrictions on IIFL Finance Limited Over Gold Loan Portfolio Concerns

The Reserve Bank of India (RBI) has directed IIFL Finance Ltd. to cease and desist from sanctioning or disbursing gold loans, as well as from assigning, securitising, or selling any of its gold loans, under Section 45L(1)(b) of the Reserve Bank of India Act, 1934. The company can, however, continue to service its existing gold loan portfolio through usual collection and recovery processes.

An inspection conducted by the RBI revealed several material supervisory concerns in the company’s gold loan portfolio, including serious deviations in assaying and certifying the purity and net weight of gold at the time of loan sanction and auction upon default. Other concerns included breaches in Loan-to-Value ratio, significant disbursal and collection of loan amounts in cash exceeding the statutory limit, non-adherence to the standard auction process, and lack of transparency in charges levied to customer accounts. These practices not only violated regulations but also significantly and adversely impacted customer interests.

Despite engagements with the company’s senior management and statutory auditors on these deficiencies, no meaningful corrective action has been taken, leading to the imposition of immediate business restrictions in the overall interest of customers. These supervisory restrictions will be reviewed upon completion of a special audit to be conducted by the RBI and after the company rectifies the findings of the special audit and RBI inspection to the satisfaction of the RBI.

This business restriction does not preclude any other regulatory or supervisory action that may be initiated by the RBI against the company.