Non-banking financial company (NBFC) IIFL Finance Ltd on Saturday (June 15) said the Reserve Bank of India (RBI) has concluded its special audit of the company, initiated in response to significant concerns identified in its gold loan portfolio.
This audit, which began on April 23, 2024, follows an earlier inspection of IIFL’s financial position as of March 31, 2023, that led to the imposition of supervisory restrictions on March 4, 2024.
The RBI’s initial inspection revealed several irregularities in IIFL’s gold loan operations, including cash disbursals and collections exceeding statutory limits, non-compliance with the standard auction process, deviations in assaying and certifying gold purity and weight, breaches in the Loan-to-Value (LTV) ratio, and a lack of transparency in customer charges.
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These findings prompted the RBI to enforce restrictions, mandating IIFL to cease the sanctioning or disbursing of new gold loans and the assignment, securitization, or sale of existing gold loans. However, IIFL was permitted to continue servicing its existing gold loan portfolio, including collections and recoveries, while maintaining other business operations.
In response to these findings, IIFL Finance undertook comprehensive measures to address and rectify the identified issues. The Board conducted a thorough review of the deviations and non-compliances, forming a specialized team to implement corrective actions and revise policies and procedures.
Despite the challenges posed by the embargo on its gold loan business, IIFL Finance’s consolidated operations remain resilient due to its diverse portfolio across other business segments and subsidiaries.
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To mitigate risks to its status as a going concern, the company executed several strategic initiatives: Despite the challenges posed by the embargo on its gold loan business, IIFL Finance’s consolidated operations remain resilient due to its diverse portfolio across other business segments and subsidiaries.
To mitigate risks to its status as a going concern, the company executed several strategic initiatives. In May 2024, IIFL successfully raised ₹1,271.83 crore through an equity rights issue.
Additionally, the company secured ₹500.00 crore via Non-Convertible Debentures (NCDs) from long-term investors. Furthermore, IIFL implemented stringent cost control measures, reducing major discretionary expenditures to preserve cash flow.
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Shares of IIFL Finance Ltd ended at ₹467.90, down by ₹4.30, or 0.91% on the BSE.