RBI removes Restrictions imposed on IIFL Finance’s Gold Loan Operations

Non-bank lender IIFL Finance informed the exchanges on Thursday that the Reserve Bank of India (RBI) had lifted the restrictions on its gold loan operations.

In March of this year, the regulator imposed restrictions on the company’s ability to issue or disburse gold loans due to supervisory concerns.

In its filing with the exchange, the company stated, “RBI’s decision to lift restrictions takes effect immediately and allows the company to resume sanctioning, disbursal, assignment, securitisation, and sale of gold loans in compliance with all relevant laws and regulations.”

RBI imposed restrictions on IIFL Finance on March 4, 2024, after discovering errors in assaying and certifying the purity and net weight of gold during loan sanctioning and auctions. The central bank also discovered loan-to-value ratio breaches, substantial cash disbursements and collections of loan amounts considerably exceeding the statutory limit, non-compliance with the standard auction process, and a lack of transparency in consumer charges.

IIFL Finance notified the exchanges in April 2024 that the RBI would be conducting a special audit.

IIFL Finance is one of the two largest non-banking finance companies (NBFCs) in the gold lending industry. According to the investor presentation, as of June 30, 2024, gold loan AUM accounted for roughly 72% of the company’s activity, or Rs 14,727 crore. It had declined 33% year on year (Y-o-Y) and 37% consecutively since March 30, 2024.

Gold loans are made available to salaried, self-employed, and micro, small, and medium enterprises (MSME) customers through 2,775 branches spread across 25 states and four Union territories.