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Sources Claim IIFL Finance Lodges a Compliance File Report with the Central Bank

Submitted by admin on March 12th, 2024

As per reliable sources, the NBFC (Non-Banking Finance Companies) has completely barred cash disbursements over Rs 20, 000 in gold loans.

According to the sources close to the development, the NBFC, IIFL Finance has lodged a file of compliance with the Central Bank of India (RBI) on Friday after some systematic changes in their operating procedures. On March 4, the banking regulator restricted the NBFC from approving gold loans owing to norm violations.

“The company has submitted all detailed documents along with evidence to the regulator. It has made proof changes in all the five compliance issues that the regulator pointed out,” according to an anonymous source.

The Reserve Bank of India has restricted IIFL Finance from scrutinizing, assigning, or approving any gold loans owning to “serious” deviations in assessing and certifying net weight and purity of the gold at the same time of approving loans as well as auctioning upon default, breach of loan-to-value ratio and significant collection and disbursal of loan amount in cash exceeding the regulatory limit, non-compliance to the standard auction process and absence of transparency in charges regarding freezing defaulters’ accounts.

Sources claim that the NBFC has barred cash disbursements over Rs 20, 000 in gold loans. Secondly, it arranged for gold auctioning at the Taluka level in February. Regarding the assessment of the purity of gold, the central bank has asked for changes in bills or contracts, which have been done.

A reliable source claims that the company has created an internal mechanism to make sure that the Loan-to-Value ratio stays below 75%.

Further, IIFL Finance is busy providing banks with detailed responses. These banks include Union Bank of India, State Bank of India, and Canara Bank among others. The NBFC has taken a firm stand to conform to the RBI’s norm on the auctions. Banks are in the process of re-assessing their gold loan co-funding partnership with IIFL Finance. A senior banker says the SBI has already written a letter to the NBFC seeking detailed information on RBI’s decree and IIFL Finance’s action plan from now on.

IIFL Finance has partnered with 15 co-lending banks to cover all businesses – home loans, microfinance loans, and gold loans. If it comes to gold loans, its co-lending partnerships include Indian Overseas Bank, DBS Bank, DCB Bank, Karur Vysya Bank, South Indian Bank, and Union Bank, according to the presentation by the latest investors.

Under the gold loan product, the co-lending disbursal was Rs 4, 123 crore – 37.2% of the entire co-lending portfolio as on December 31. Restriction on gold loan sanction is likely to affect IIFL Finance’s earnings per share by 20-25%, a source claims. According to the source, the IIFL Finance Board would have a meeting tomorrow i.e. on March 13 to sanction $200 million equity infusion by Fairfax India, a company owned by billionaire Prem Watsa.

IIFL Finance’s shares closed 10% higher at Rs 420.40 apiece on the BSF Friday.