IIFL Finance Ltd said on September 19 that the Reserve Bank of India (RBI) has eased limitations on its gold loan business. "The RBI, in a message dated September 19, 2024, relaxed the limitations on the company's gold lending operation. The RBI's decision takes effect immediately and authorizes the Company to restart the sanctioning, disbursement, assignment, securitization, and sale of gold loans in accordance with all applicable rules and regulations," IIFL Finance stated in a stock exchange statement.
On September 19, IIFL Finance's NSE shares finished 6% down at Rs 497 per. "The Company is committed to upholding the highest standards of compliance and will continue to ensure that the remedial actions taken are sustained," according to IIFL Finance.
The RBI Implemented the limitations on March 4, 2024
IIFL came under regulatory investigation in March as part of a crackdown on financial institutions, when the RBI instructed it to halt new gold-backed lending due to "material supervisory concerns". Three local rating organizations, ICRA Ltd, Crisil Ltd, and Care Ratings Ltd, have placed it on rating watch with negative or emerging implications as a result of the prohibition.
Fitch Ratings, an international credit rating agency, has also put its B+ rating on negative watch. According to its financial filings, the number of employees in gold loan offices has already reduced from 15,000 in March to 12,000 in June, as reported by Bloomberg on September 19.
Since the March ban, the assets under management in its gold lending business have been reduced by more than half to Rs 12,162 crore as of August 5. In March, the RBI stated that it conducted an investigation of the firm based on IIFL's financial situation as of 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…," according to the report.
In March, the RBI stated that the supervisory limits will be reviewed following the conclusion of a special audit to be launched by the RBI, correction by the firm of the special audit findings, and the central bank's satisfaction with the Reserve Bank of India inspection findings.
