IIFL Finance submits compliance report to the Reserve Bank of India
IIFL finance Ltd, a non-banking financing company (NBFC), has reportedly submitted a compliance report to the Reserve Bank of India (RBI) on Friday.
This comes after the business implemented a number of significant systemic changes in its operational procedures, according to sources close to the development.
The non-bank financial company (NBFC) was prohibited from providing gold loans on March 4 2024 by the Reserve Bank of India owing to violations of the norms.
It has been reported that IIFL finance has provided the regulatory body with all of the thorough records and evidences. “It has made full proof changes in all five compliance issues that the regulator pointed out,” a source said, declining to be identified in order to protect their identity.
Due to “serious” deviations in assaying and certifying the purity and net weight of the gold at the time of loan sanctioning and at the time of auction upon default, breaches in loan-to-value ratio, significant disbursal and collection of loan amount in cash far in excess of regulatory mandate, non-adherence to the standard auction process, and lack of transparency in charges being levied to customer accounts, the central bank (RBI) had prohibited IIFL Finance from offering, securitizing, or assigning any gold loans. This was due to the fact that the central bank had prohibited the company from offering, securitizing, or assigning any gold loans.
“The company has also created an internal mechanism to ensure that the LTV remains below 75%, and it will ensure that customers are aware of the Rs 200 charge for auction,” a source who is in the know said.
In addition, IIFL Finance is currently in the process of sending thorough communication to several banks, such as the State Bank of India (SBI), Canara Bank, and Union Bank of India, amongst others, regarding the activities that the NBFC has made in order to comply with the norm established by the Reserve Bank of India at this time. A top banker stated that banks are reevaluating their gold loan co-lending agreement with IIFL Finance.
There are fifteen co-lending bank partners that IIFL Finance works with. In accordance with the most recent investor presentation, the company’s gold loan co-lending partnerships consist of seven different financial institutions: DBS Bank India, DCB Bank, Canara Bank, Union Bank, South Indian Bank, Indian Overseas Bank, and Karur Vysya College.
As of December 31, the entire amount of co-lending disbursements under the gold loan product amounted to Rs 4,123 crore, which represented 37.2% of the overall co-lending portfolio. As a result of the restrictions placed on the gold loan business, the profits per share (EPS) of IIFL Finance are expected to be impacted by 20% to 25%, according to the first source that was cited above. The Board of Directors of IIFL Finance is scheduled to meet on March 13 in order to give their approval for an equity infusion of $200 million that will be led by the billionaire Prem Watsa and Fairfax India.
There was a 10% increase on last trading day in the price of each share of IIFL Finance on the BSE, which ended the day at Rs 420.40.
