On Tuesday, IIFL Finance MD Nirmal Jain made it clear that "operational issues"—rather than issues with ethics or governance—were the reason behind the RBI's action against the company's gold lending business.
As of the conclusion of the third quarter of FY24, IIFL Finance, one of the top two NBFCs in the gold loan industry, had a gold loan portfolio worth Rs 24,692 crore, or 32% of its total loans, valued at Rs 77,444 crore.
The RBI announced that it had launched a special audit and that, after the audit was over, the limits would be re-evaluated. The business is permitted to use standard collection and recovery procedures to manage its portfolio of gold loans. Following the Reserve Bank of India Act Section 45L(1)(b), the limitations were put in place. According to Jain, the company is making the necessary corrections to guarantee that there are very few "differences" in the way audit teams and branches evaluate the worth of gold.
The RBI announced that it had launched a special audit and that, after the audit was over, the limits would be re-evaluated. The business is permitted to use standard collection and recovery procedures to manage its portfolio of gold loans. Following the Reserve Bank of India Act Section 45L(1)(b), the limitations were put in place. According to Jain, the company is making the necessary corrections to guarantee that there are very few "differences" in the way audit teams and branches evaluate the worth of gold.
Jain stated that the company will abide by the RBI circular and that it has sufficient group liquidity in addition to continuing to recover money through payback.
The company will want an urgent meeting with RBI. According to reports, the regulator discovered violations of the loan-to-value ratio, large cash collections and disbursements of loan amounts considerably over the statutory limit, disregard for the established auction procedure, and opaque client costs.
The company will want an urgent meeting with RBI. According to reports, the regulator discovered violations of the loan-to-value ratio, large cash collections and disbursements of loan amounts considerably over the statutory limit, disregard for the established auction procedure, and opaque client costs.
Gold testing, according to Jain, is a subjective and manual process. Jain stated that the contacts with the RBI had taken place during the previous forty-five days. "It is done at branches, audit team is generally more conservative, which may differ from how branches look at value," Jain added.