Mumbai, March 4 (IANS) The Reserve Bank of India (RBI) on Monday directed IIFL Finance Ltd. to stop sanctioning or disbursing gold loans or assigning/securitising/selling any of its gold loans with immediate effect.
The company can, however, continue to service its existing gold loan portfolio through usual collection and recovery processes, the RBI said.
The RBI said its inspection of IIFL’s financial position has revealed material supervisory concerns 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.
The inspection also showed breaches in the loan-to-value ratio; significant disbursal and collection of loan amount in cash far in excess of the statutory limit; non-adherence to the standard auction process; and lack of transparency in charges being levied to customer accounts by the IIFL.
These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers, the RBI pointed out.
Over the last few months, the RBI has been engaging with the senior management and the statutory auditors of the company on these deficiencies; however, no meaningful corrective action has been evidenced so far. This has necessitated the imposition of business restrictions with immediate effect, in the overall interest of the customers, the RBI said.
These 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.
This business restriction is without prejudice to any other regulatory or supervisory action, which may be initiated by the RBI against the company, the central bank statement added.
–IANS
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