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RBI Audit Prompts IIFL Finance to Delay Board Meeting for Earnings Release

Submitted by admin on May 25th, 2024

The financial service company, in their regulatory filing to the stock exchanges, has stated that the finalisation as well as the following approval and consideration of the financial results for the quarter and financial year ending on March 31, 2024 shall be extended beyond May 30, 2024.

As the Reserve Bank of India has ordered an audit, IIFL Finance has extended the date of announcing their quarterly earnings, which was previously scheduled to be on May 30.

“The extension is requested due to the engagement of our internal teams in the Special Audit of the Company being initiated by the Reserve Bank of India (RBI) following an RBI Order dated March 04, 2024,” the exchange filing mentions.

The results are expected to be released not later than the last day of June.

In addition, the filing also reads that the trading window will stay closed for designated persons (which include directors and their immediate family members) until 48 hours after the financial results are made public.

In early March 2024, the Central Bank of India issued an order to IIFL Finance to stop approving or disbursing gold loans or securitizing, selling or assigning any of its gold loans.

However, the company is not prevented from servicing its gold loan portfolio via the usual recovery and collection process.

Explaining the logic behind such a move, the RBI cited observing certain “material supervisory concerns” in the company’s gold loan portfolio, including conspicuous deviations in certifying and assaying net weight and purity of the gold during the time of loan sanctions and also at the time of auctions upon defaults, which clearly breaches Loan-to-Value ratio.

Additionally, the RBI observed significant collection and disbursal of loans in cash exceeding the statutory limit: non-compliance with the standard auction process and lack of transparency in charges that are levied to customer accounts.

“These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers,” the central bank had said.

Over the past few months, the RBI had made it public about their engagement with the senior management and the statutory auditors of IIFL Finance on these deficiencies. However, when imposing the stringent restrictions, the RBI rationalised their move by claiming that no fruitful measures had come up so far to correct the identified wrong practices.

The Central Bank had said that they would review these supervisory restrictions, which were imposed on IIFL Finances, upon completing a special audit that the RBI would institute following rectification by the company of the special audio findings as well as the findings of RBI inspection, to the satisfaction of the higher authority i.e. the RBI