RBI stops IIFL Finance from sanctioning gold loans over ‘material supervisory concerns

In a major decision, the Reserve Bank of India barred IIFL Finance to stop disbursing gold loans with immediate effect on Monday. The central bank said that the decision had been taken after noticing ‘material supervisory concerns’ that were observed in the gold loan portfolio of the firm.

“The Reserve Bank of India has today, in the exercise of its powers under Section 45L(1)(b) of the Reserve Bank of India Act, 1934, directed IIFL Finance Ltd. to cease and desist, with immediate effect, from sanctioning or disbursing gold loans or assigning/ securitising/ selling any of its gold loans,” the RBI said in an official statement.

The Reserve Bank of India (RBI) identified that IIFL Finance had surpassed allowable cash collections and lacked transparency in its fee structure. Despite ongoing discussions with the company’s senior management and auditors over the past few months, no significant corrective actions were observed.

Consequently, the RBI swiftly imposed business restrictions on IIFL Finance. However, the company is permitted to continue managing its existing gold loan portfolio through standard collection and recovery procedures, as stated by the regulator.

This move highlights the RBI’s commitment to maintaining transparency and adherence to regulations within the financial sector. It also underscores the importance of regulatory oversight in ensuring fair and ethical business practices.