IIFL Finance to make slow growth in gold loan after RBI lifts curbs; profitability may be hit: Brokerages

With the Reserve Bank of India (RBI) lifting restrictions on gold loan business from IIFL Finance on September 19, the non-bank lender will now focus on slow-but-steady growth in the segment, brokerages said.

The lender will look at following compliance measures more strictly and may see some impact on the profitability in the near term, they said.

“The lifting of the ban on gold finance business is surely a positive news for IIFL Finance but we believe that incremental growth will be less aggressive and in line with most peers, as the company is obliged to follow best practices and norms to avoid any future problems from the regulator,” Incred Equities said in a note on September 20.

Domestic brokerage house Motilal Oswal highlighted that IIFL Finance may make a strong comeback amid competition from other non-bank lenders but may see some impact on profitability. “We expect IIFL to now make a strong comeback in the gold lending business to regain its market share in the segment. We believe that IIFL could even take pricing actions and compete aggressively (if needed) to accelerate its gold loan growth. While this could have some impact on the segment’s profitability in the near term, it will help IIFL regain its market share from its peers and even some banks,” it said.