The logo of IIFL Finance.
Credit: IIFL Finance website
Bengaluru: Rating agency Fitch, on Thursday, placed India's IIFL Finance's 'B+' long-term issuer default rating and medium-term note programme rating on negative watch.
This comes after the country's central bank barred the non-banking finance company from offering gold loans earlier this month, citing "material supervisory concerns".
"The move reflects a downside risk to IIFL Finance's franchise, profitability and overall risk profile if regulatory restrictions on new gold-backed lending are prolonged," Fitch said in a note.
The impact of the restrictions will depend on their duration and any spill-over effects on the rest of IIFL Finance's business, Fitch said.
The company's gold loans under management stood at Rs 24,692 crore (around $3 billion) as of Dec. 31, accounting for 32 per cent of total loan assets.
IIFL Finance said on Wednesday it would raise funds of up to Rs 2,000 crore ($241.5 million) to shore up its capital, in addition to up to $200 million in liquidity support from top shareholder Fairfax India.
The company's shares have tumbled nearly 38 per cent since the Reserve Bank of India (RBI) placed the restrictions on March 4. The stock settled 3.5 per cent lower on Thursday.