Shares of IIFL Finance soared in trade on Friday, rising 14 percent after it informed stock exchanges on June 4 that the audit mandated by banking regulator Reserve Bank of India (RBI) has been concluded.
RBI had appointed Jaipur-based Rajvanshi & Associates to conduct the audit into the books of IIFL Finance, sources informed CNBC-TV18. The NBFC has not yet made any representation before the regulator since the conclusion of the audit, it is learnt.
On March 4, RBI had restricted the company's gold loan business, citing 'material supervisory concerns'. The next step will be for the regulator to revert if and when the restriction placed on the NBFC will be lifted. "The Reserve Bank of India has today, in 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 had said in a press release on March 4.
The material concerns were deviations in assaying and certifying purity and net weight of the gold, at the time of sanction of loans and at the time of auction upon default. The deviations also included breaches in Loan-to-Value ratio (LTV), significant disbursal and collection of loan amount in cash, far in excess of the statutory limit among others, according to RBI.
A day later, on March 5, in a conference call with analysts, IIFL Finance had made it 'unequivocally clear that there are no governance issues'. The NBFC added that there were 'operational issues that will be addressed with utmost sincerity', and the company was taking immediate and comprehensive steps to resolve those issue.
Reuters had reported quoting officials familiar with the development that IIFL Finance has been facing a liquidity crunch as banks have turned cautious while lending to it following the RBI clampdown.
Earlier in May, RBI had lifted restrictions on another NBFC Bajaj Finance's two digital lending products in less than six months, which some brokerage notes said endorsed the management's ability to course-correct quickly.
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