The Reserve Bank of India on September 19 allowed non-banking finance company (NBFC)IIFL Finance to offer gold loans after barring it from the same in March this year due to serious violation of norms.
“We wish to inform you that the RBI, through its communication dated September 19, 2024, has lifted the restrictions imposed on the gold loan business of IIFL Finance. These restrictions were earlier imposed on March 4, 2024, which prohibited the Company from sanctioning, disbursing, or assigning/securitising/selling any of its gold loans,” IIFL Finance said in an exchange notice.
The RBI had taken action against IIFL Finance due to “serious deviations” in assaying and certifying purity and net weight of the gold while sanctioning loans, and at the time of auction upon default. The regulator found breaches in loan-to-value (LTV) ratio set in gold loan, and found that the NBFC was disbursing and collection significant amount via cash.
Following the RBI order, the non-bank lender made key systemic changes in its operating processes, sources said, and completely restricted cash disbursements of more than ₹20,000 in gold loans. It also created internal mechanism to ensure gold loan LTV remains below 75 per cent.
During the course of ban, IIFL Finance’s gold loan business was impacted significantly. Its gold loan book reduced from ₹26,081 crore as on March 4 to ₹12,162 crore as on August 5. Over one million customers closed their accounts and reclaimed their jewellery. Over half of loan assets were liquidated, funds were repaid to banks and jewellery was returned to customers, according to its Q1FY25 investor presentation.