Reserve Bank of India (RBI) has taken another strict action against IIFL Finance. RBI has banned IIFL Finance from distributing gold loans. The central bank has taken this action due to material supervisory concerns. However, the company will continue to service its existing gold loan portfolio.
RBI said that if satisfactory results come after the special audit, then relief can be given to IIFL Finance. This is the second major RBI action a month after Paytm Payments Bank.
These Rules Were Being Violated
RBI has taken this action under the Reserve Bank of India Act 1934. IIFL Finance has been directed not to sanction any gold loan with immediate effect.
According to RBI, irregularities in the gold loan have been detected during the company’s financial position investigation until March 31, 2023. The company was not making proper reports regarding the purity and weight of gold during gold loan distribution and auction. Besides, the loan-to-value ratio was also violated.
According to RBI, IIFL Finance used more cash than the norm, even during loan distribution and recovery. Apart from this, transparency regarding customer charges was also not maintained.
There Could Be A Negative Impact On Customers
RBI said that all these methods were affecting the interests of IIFL Finance’s customers. RBI and the company officials have been trying to remove these shortcomings for the last few months. But, when the results of the reforms were not good, the Central Bank had to take this strict step. If this was not done, then customers could be adversely affected.
