Representative image of gold bars.
Credit: Reuters File Photo
Mumbai: The Reserve Bank on Monday barred IIFL Finance with immediate effect from sanctioning or disbursing gold loans after certain material supervisory concerns were observed in its gold loan portfolio.
IIFL Finance can, however, continue to service its existing gold loan portfolio through the usual collection and recovery processes, the RBI said in a statement.
"The RBI has today...directed IIFL Finance Ltd to cease and desist, with immediate effect, from sanctioning or disbursing gold loans or assigning/ securitising/ selling any of its gold loans," it said.
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.