IIFL Finance on March 5 clarified that it faces no governance issue after Reserve Bank of India barred the NBFC from sanctioning and disbursing gold loans.
At a conference call with analysts, IIFL Finance said, "We wish to make it unequivocally clear that there are no governance issues. These are operational issues that will be addressed with utmost sincerity. We are taking immediate and comprehensive steps to resolve this issue. All other businesses, except gold loan, to continue as usual."
On March 5, IIFL Finance's scrip on BSE tanked 20% after RBI on Monday barred IIFL Finance from sanctioning or disbursing gold loans with immediate effect after certain material supervisory concerns were observed in its gold loan portfolio.
"Steps taken by RBI may be a bit hard. Have taken corrective action to ensure differences between branches and audit team is minimal. Most of out co-lending partners make their own assessment of quality and weight. We received 135 complains from RBI about our gold loan customers, which is very few compared to the size of our business," said the firm's management.
The RBI said an inspection of the company was carried out by it with reference to IIFL's financial position as of March 31, 2023. ''Certain material supervisory concerns were observed in the gold loan portfolio of the company, including serious 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...,'' it noted.
These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers, the central bank added.
It further said the supervisory restrictions will be reviewed upon completion of a special audit to be instituted by the RBI and after rectification by the company of the special audit findings and the findings of RBI inspection to the satisfaction of the central bank.
IIFL Finance said it has 15 co-lending partners of which gold partners are about 6-7 and said it has approached RBI for an urgent meeting on March 5 to seek special audit to resolve issues.
"Have implemented corrective action based on RBI's directives on gold loans. Will comply with norms fully and try to resolve issues quickly. RBI's action came as a surprise and came quicker than we thought," said IIFL Finance.
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