Private sector lender DCB Bank has not seen any concern in its co-lending partnership with IIFL Finance, said Murali Natrajan, outgoing chief executive officer and managing director (CEO and MD) of the bank.
“On our co-lending deal with IIFL Finance, our relationship and portfolio quality so far, including payments, after March 4 has not shown any concern,” said Natarajan at a post-results press call on April 24.
In a regulatory statement after the RBI action on IIFL Finance, the bank on March 4 said: “The bank has co-lending relationships with NBFCs (non-banking financial companies) beginning May 2021. The bank’s gold loan co-lending arrangement with IIFL Finance Limited has been in existence since August 2021. As of now, our portfolio performance has been satisfactory. We have a due diligence process to give us a reasonable assurance on the co-lending portfolio.”
Also read: Gold loan market may feel heat of RBI's action against IIFL Finance, say experts
IIFL special audit and RBI action
The special audit directed by the banking regulator at IIFL Finance was initiated on April 23, the company has informed stock exchanges through a regulatory filing. The disbursement of fresh gold loans have been suspended till "satisfactory completion" of the audit, IIFL Finance said in the release to exchanges.
The measure is part of the RBI’s supervisory action over concerns around certain loan disbursement practices and the finance and investment services company said it is extending full cooperation to the special audit team.
On March 4, the Reserve Bank of India (RBI) had asked IIFL Finance to stop sanctioning or disbursing gold loans upon observing certain "material supervisory concerns" in the company's gold loan portfolio. Shares had taken a sharp knock the following day after the regulatory action. The RBI's inspection had revealed non-adherence to standard auction process and lack of transparency in charges being levied to customer accounts.
"These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers," the RBI said.
IIFL Finance has been looking to raise capital after the RBI's curb to offer gold loans and, on April 17, the company had approved a rights issue of Rs 1,272 crore, slated to open at the end of this month. The company provides gold loans through 2,721 towns and cities across 25 states and four Union Territories to salaried, self-employed, and MSME customer segment.
DCB Bank in Q4
The bank reported a net profit of Rs 156 crore in the March quarter, registering a 9.85 percent jump over the year-ago period. The bank had reported a profit of Rs 142 crore in the fourth quarter of the 2022-23 fiscal. The bank's total income rose to Rs 1,581 crore in the fourth quarter of FY24, from Rs 1,302 crore a year ago.
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